Aggregate demand matters for female labour force participation: evidence from OECD panel data

Female labour force participation remains a major challenge for advanced economies, with important implications for both gender equality and labour supply in ageing societies. Existing research has predominantly focused on supply-side determinants, while the role of aggregate demand has received comparatively little attention. Using panel data for 21 OECD countries over the period 1960–2016 and a local projection approach with two-way fixed effects, we examine the long-run effects of autonomous-demand expansions and contractions on female labour force participation. We find that demand expansions generate persistent increases in participation, while contractions produce similarly persistent declines. Normalising the estimated long-run effects by the treatment dosage yields marginal effects of 0.13 and 0.14 for expansion and contraction episodes, corresponding to long-run elasticities of 0.22 and 0.23, respectively. The effects are strongest in Mixed Market Economies. These findings show that macroeconomic demand conditions are an important and previously overlooked determinant of female labour force participation, suggesting that demand management can complement conventional supply-side policies.