The Cost of Women’s Labor Supply and Occupational Choice Frictions

Abstract This paper quantifies women’s occupational choice frictions between manufacturing and services in Japan from the early 2000s to the late 2010s using a general equilibrium Roy model. We then decompose changes in women’s sectoral employment propensities relative to men’s into comparative-advantage and friction components. In the full sample (ages 20–59), the model-implied occupational distortion moves closer to the frictionless benchmark, whereas in the young subsample (ages 20–34), it shifts from manufacturing-biased to service-biased by the late 2010s. Over the same period, women’s comparative disadvantage in manufacturing narrows, especially in the young subsample. Within the model, changes in comparative advantage and occupational choice frictions largely offset each other, so women’s sectoral employment propensities relative to men’s change only modestly. Counterfactual simulations show that output losses from occupational choice frictions evolve differently across the two samples: they decline sharply in the full sample but increase in the young subsample. Specifically, the output loss falls from about 18 % to about 4 % in the full sample, whereas it rises from about 6 % to about 10 % in the young subsample.