Gender Gap and Decline in Female Labour Force Participation in India: A Joint Search Perspective

India, on top of having a large gender gap in labour force participation, also experienced a significant
decline in participation rate of women in the recent years. In order to understand, and to decompose the
gender gap and the decline in female labour force participation into demand and supply side factors, we
present an equilibrium joint search model of couples with gender-specific wage offers and home
productivities. In this heterogeneous agents setup, our counterfactual exercises show that, gender
disparities in labour demand can account for only 6.4% of the level difference, while the differential trends
in labour demand can explain around 35% of the decline in female participation over time. We find that
the increase in average household income driven by a large increase in male wages compared to female
wages, reduced the need for women to supplement the family income, in turn causing them to drop out
of the labour force.