critical from a policy standpoint. Reforms need to focus more on the labor market discrimination in Costa Rica and Panama. On the other hand, El Salvador will benefit from human capital interventions and policies that affect preferences and social norms.

The model shows that the changes in the occupational distribution had a substantial impact on aggregate output. Market output per capita in 2015 drops by 23-40 percent in Costa Rica and by 75-94 percent in Panama when I replace the present level of barriers and preferences with those from 1995. For the former, the lower bound translates to roughly half of the actual change in real GDP per capita. For Panama, the conservative estimate surpasses the actual growth by 16 percent.<sup>8</sup> The aggregate implications are milder in El Salvador. Additionally, it is difficult to determine whether the shifts in barriers and preferences aid or constrict growth. Depending on the choice of parameters, market output per capita in 2015 could have been either 13 percent lower or 6 percent higher if past levels persisted.

Decomposition reveals that gains in Costa Rica and Panama are driven by changes in obstacles to human capital accumulation. Shifts in labor market discrimination created headwinds in both countries. Though less powerful than the human capital channel, declines in discrimination support growth in the United States (Hsieh _et al._ , 2019). The exercise contributes to the literature by showing that the aggregate effects of shifts in preferences can be quantitatively significant. Unlike the US study, my identification strategy allows men’s preferences to change over time. Over the decades, both women's and men's preferences in El Salvador have shifted away from market work. Market output per capita in 2015 would have been 5-16 percent higher if the country had the preference profile as in 1995. This indicates 10-34 percent of the actual growth over the period. In contrast, preferences do not exert any meaningful impact on growth in the United States.

Finally, the paper complements the literature that has investigated the barriers to occupational decisions in CENAMs by comparing how the situation has evolved over the last two decades.<sup>9</sup> A novelty of the approach here is that the occupational choice model adjusts for the fact that workers self-select into occupations based on their idiosyncratic occupation-specific innate talent. Under self-selection, occupational frictions are more robustly associated with occupational shares than with wage gaps (Hsieh _et al._ , 2019). The average talent of women will be higher in an occupation in which they are not well represented as only the most talented can pursue it. In the absence of the above three forces, women earn more than men to compensate for talent differences. Davila and Pagan (1999) make a similar point while comparing gender wage gaps in Costa Rica and El Salvador. In the presence of selection effects, the analysis of frictions should jointly consider the occupational distribution and wage gaps.

Following the identification strategy in Hsieh _et al._ , (2019), I measure occupational frictions faced by women relative to men. This amounts to assuming that men do not face discrimination in the labor markets, nor do they encounter obstacles to human capital formation. The assumption is restrictive as barriers can arise for both genders. Indeed, Dahbura (2018) and Kalsi (2018) find that boys are more prone to criminal victimization in El Salvador which affects their schooling. The identification, however, does not

> 8 In the results section, I explain why real labor earnings match more transparently to data relative to GDP per capita. Though quantitatively different, the significance of the three forces remains substantial when using labor earnings as a yardstick. At a minimum, the three channels jointly account for 25 percent of the actual gain in real earnings per capita in Costa Rica. For Panama, their contribution ranges between 147-185 percent of the actual change.

> 9 Some of the earlier studies include Arends (1992a; 1992b), Winter and Gindling (1992), Gindling (1993) and Funkhouser (1997).

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