Despite the shift in preferences towards the market occupations in Panama, the home-sector remains the occupation of choice for women in 2015 (figure 5.3(a)). The median in Panama yy is even lower than in El Salvador and stands at 0.72. Managerial and technical jobs are among the three ii,wwoommoomm,2015 zz least preferred occupations. The situation is not very different for men. Barring clerical positions, men prefer home-sector work over all other occupations (figure 5.3(b)). Like women, men find managerial and technical trades to be particularly less preferable. The median in Panama is 0.88 which is lower yy than in El Salvador. However, the country might move closer in the future if the individual time trends in ii,mmoomm,2015 zz preferences hold.

This concludes the discussion on the quantitative aspects of barriers and preferences. In the next section, I quantify the aggregate impact of these exogenous variables in a series of counterfactual experiments.

# **6   Aggregate implications of barriers and preferences**

The calibrated model allows quantifying the effect of barriers and preferences on aggregate output. This section presents the counterfactual change in output when I replace the present exogenous conditions with those in 1995 and 2005.<sup>17</sup> There are three points to note here. First, the counterfactuals relate to the labor market barriers faced by all cohorts. Still, it is only the young workers who realize a shock in preferences and barriers to human capital accumulation. Hence, the exercises cause a change in the occupational choices of only young workers. However, this does not mean that the non-young cohorts are immune to counterfactual changes. Changes in labor market barriers i in period affect all cohorts and bear a direct influence on wages (equation (8)). Similarly, changes in cc ii(ww)i and i apply only to the young cohort but these ττ tt yy yy changes have general equilibrium effects that have implications for other cohorts. Second, in all the ii ii ττ zz counterfactuals, I keep occupation specific TFPs i fixed to focus on the effect borne by the barriers and preferences. Finally, I consider only the share of output that is produced in the market occupations so that it maps to real GDP following the method in Hsieh AA _et al._ (2019).

**6.1   Aggregate output and labor earnings** Let me begin by investigating the change in market output when I replace i , i ,2015(h) and i ,2015 with their prior values. A decline in market output will indicate that the changes contributed cc ,2015(ww) yy ττ ττ yy to economic growth and vice versa.<sup>18</sup> Thus, this exercise assists in answering two vital questions. First, zz which of the three channels is critical in explaining the aggregate growth over the last two decades? Second, has any channel provided headwinds to economic expansion? If so, how large has been this drag?

> 17 The robustness checks on the baseline results are relegated to the appendix.

> 18 A more intuitive approach will be to plug the 2015 values of barriers and preferences into a model calibrated to earlier periods. However, calibrating the model for prior periods requires information on wages and occupational data from the pre-1985 years. Unfortunately, the surveys do not go as far back for any country.

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