The Relationship between Gender Gaps and the Business Cycle
Abstract
"Business cycle fluctuations affect wages and labor supply of women and men differently. Using quarterly data for Germany between 1Q1995 to 4Q2020 we find that with the exception of the gender unemployment gap all other gender labor market gaps contract during a recession and widen during a boom on average. However, we also find the opposite relationship for some periods. These observations indicate that the type of the underlying shock influences gender gaps over the cycle.In order to analyze this changing relationship of business cycle and gender gaps in Germany we implement gender-specific structural differences in a DSGE model with search and matching frictions. We consider that the structural labor market characteristics of men and women, i.e. labour supply elasticities, housework elasticity, affect the average cyclical dynamics of gender gaps. Furthermore, they react quite different depending on the underlying shock. Productivity and labour-supply driven shocks, a temporary decrease of homework productivity explain why the gender wage gap increase in a recession. In demand driven recessions the gender wage gap rather contracts.
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