# **Theory and evidence**

The prevalent hypothesis about the long-term relationship between economic development and FLP is the U-shaped hypothesis (Boserup, 1970, Durand, 1975; Goldin, 1995, Psacharopoulos and Tzannatos, 1989). This broadly states that during the early stages of economic development FLP declines due to the initial structural changes of the economy and the transition from an agricultural to an industrialized society while it increases in later stages when countries mature into modern economies, fertility rates decline and female education rates increase. This is how Goldin (1995) states the hypothesis: _“Across the process of economic development the adult women's labor force participation rate is u- shaped. When incomes are extremely low and when certain types of agriculture dominate (...), women are in the labor force to a great extent. They are sometimes paid laborers but more often unpaid workers on family farms and in household businesses, often doing home workshop production. As incomes rise in most societies, often because of an expansion of the market or the introduction of new technology, women's labor force participation rates fall. Women's work is often implicitly bought by the family, and women then retreat into the home, although their hours of work may not materially change. (...) But as female education improves and as the value of women's time in the market increases still further, relative to the price of goods, they move back into the paid labor force, as reflected in the move along the rising portion of the U-shaped curve. The process suggests an initially strong income effect combined with a small own-substitution effect. At some point the substitution effect increases while the income effect may decline. During the falling portion of the U the income effect dominates, but during the rising portion of the U the substitution effect dominates.”_ (p. 62) The U-shaped hypothesis has found consistent support in data and analyses since it was first proposed and this applies to cross-country studies as well as to time-series and panel studies. Among cross-country studies, Goldin (1995) found this relationship to hold for 1980 and 1985 across a group of more than one hundred countries. Mammen and Paxson (2000) replicated Goldin’s results for 1980 and 1985 and extended the test to 1970 and 1975 reaching the same conclusion. This paper also pinpointed that the lowest participation rate is found for countries with annual per capita income around $2,500, essentially middle-income countries according to the World Bank classification of the time. Similar results have also been found by Tam (2011) for a panel of 134 countries and for the period 1950-1980 and by Tsani et al. (2013) for South Mediterranean countries.

Results from time-series studies in developed economies also support the U-shaped hypothesis. Goldin found initial evidence of the U-shape relation in a study on the US (Goldin, 1995). These results were confirmed in more recent studies (Goldin, 2004, 2006, Olivetti, 2013) that were also able to pinpoint five distinct phases characterizing the evolution of FLP in the US. The first phase (“The independent female worker”, up to the 1920s) saw the entrance of young and low educated women into the labor force mostly in poorly paid or non-paid occupations with a subsequent exit from the labor force explained by marriage and the shift to home work. In a second phase (1930s-1950) married women start to join the labor force due to the increased demand in clerical jobs and the increased level in female education. In the third phase (1950s-1970s), FLP goes through a real revolution with rapid increases explained by better education of women, rising wages and the introduction of more flexible working arrangements such as part-time work.

Time-series evidence for countries other than the US are still scarce but similar results to the US have been found by Tilly and Scott (1987) for England and France. The U-shaped hypothesis has also been studied in developing economies with time-series data, although these series are typically much shorter than in developed economies. Mammen and Paxson (2000) provide some evidence for the U-shaped hypothesis in Thailand and India. Using cross-country longitudinal data with country fixed effects, these 3