Job Finding Rate and Female Labor Supply - A Heterogeneity Perspective: Evidence from Pakistan

Abstract

In contemporary labor economics, the concept of job finding rate is central as it defines the job search and measures the employment potential of the labor market. Considering this fact, economists recently counts on measuring the flows of labor among three states i.e. employment, unemployment and inactivity. The study determines female labor supply considering labor market flows and job finding rate in Pakistan by employing cross sectional data from PSLM Survey for the year 2013-14. The prime objective of the study is to incorporate the heterogeneity in female labor supply model. Therefore, the study evaluates female labor supply, taking into consideration endogenous household job finding rate including non-participation of the females. It presents both theoretical as well as empirical analysis to show how job finding rate affects labor supply of female. The study has also incorporated a divergent set of control variables to cover the composition effect and dispersion effect of the labor market in this analysis. The main conclusion stresses on including the inactive group to determine job finding rate and unobserved heterogeneity of female’s decision making. Not doing so would bias the imputed importance of other factors shaping aggregate participation and unemployment rates. The results provide a hint for policy makers to consider the relevant flows for improvement in female employment in Pakistan