Research Highlights Article
October 21, 2025
Gender and the macroeconomy
How has women's labor force participation shaped America's business cycles?
Source: David Bedard, Public domain
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The , characterized by reduced economic volatility beginning in the 1980s, and the emergence of following the 1990 recession have attracted considerable scholarly attention. Prior research has primarily attributed these macroeconomic phenomena to diminished economic shocks or enhanced monetary policy effectiveness.
In a paper in the 蝌蚪网 Journal: Macroeconomics, author proposes an alternative explanation centered on changes in women's labor force participation. "What half of the population does is not a minor detail," she told the 蝌蚪网 in an interview.
Albanesi contends that standard macroeconomic models, which typically do not differentiate between male and female workers, overlook a significant source of variation in aggregate labor market dynamics. Using gender-disaggregated time-series data for hours per capita and hourly wages, she was able to document asymmetric cyclical employment patterns between men and women.
Male employment has consistently exhibited slower recoveries following recessions. However, through the 1970s and 1980s, female employment demonstrated minimal contraction during recessions and sustained growth during recoveries.
Hours and wages by gender
The chart below shows female and male yearly aggregate hours per capita (Panel A), and the female-to-male ratio of hours per capita and hourly wages (Panel B).
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This pattern shifted in the early 1990s, coinciding with the plateau in the growth of women's labor force participation. Subsequently, women's cyclical employment behavior converged toward the pattern observed for men, exhibiting greater sensitivity to economic downturns and slower recovery. Albanesi's analysis indicates that this convergence accounts for the majority of employment shortfalls during the 1991 and 2001 recoveries and approximately half of the slow recovery following the 2007–2009 recession.
To assess the macroeconomic significance of these empirical patterns, Albanesi developed a dynamic stochastic general equilibrium (DSGE) model incorporating gender heterogeneity and extending standard frameworks through two modifications: on the supply side, differential labor supply elasticities and work-related utility costs by gender; and, on the demand side, imperfect substitutability between male and female labor with gender-specific productivity dynamics.
The model reveals that excluding gender differences yields the conventional result: that reduced technology shock volatility seems to explain the majority of the Great Moderation. However, when gender heterogeneity is incorporated, technology shock volatility remains stable throughout the period.
“My analysis suggests that the smaller-technology-shock hypothesis might not be fully grounded,” Albanesi said.
The model instead attributes reduced business cycle volatility to countercyclical features of the female labor market combined with women's increasing share of aggregate hours worked.
My analysis suggests that the smaller-technology-shock hypothesis might not be fully grounded.
Stefania Albanesi
The countercyclical nature of female labor supply is consistent with the idea of “spousal insurance.” When husbands face job loss or wage cuts during recessions, wives are less likely to quit their jobs and may increase their hours, providing household insurance against income shocks. As women's employment share increased, this mechanism exerted a dampening effect on aggregate volatility. Additionally, sectoral composition differences contributed to this pattern, with women concentrated in relatively acyclical service sectors, such as education and healthcare, while men represent a larger share of employment in cyclically sensitive industries, such as manufacturing and construction.
The model’s counterfactual simulations for the periods 1969–1992 and 1993–2017 quantify the effect of plateauing female participation. If female hours had continued their pre-1993 growth rates, the declines in the total hours worked would have been reduced by approximately 33 percent during the 2001 and 2007–2009 recessions, with correspondingly stronger recoveries.
These findings suggest that women's labor supply can function as a macroeconomic stabilizer and that policies affecting female labor force participation—such as childcare, parental leave, and workplace flexibility—may have aggregate effects extending beyond their impact on individual households.
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“Changing Business Cycles: The Role of Women's Employment” appears in the October 2025 issue of the 蝌蚪网 Journal: Macroeconomics.