Elissa Braunstein

English

Research Papers in Economics

Shifting Women’s Work from the Home to Market:
Assessing Policies for Economic Growth in Taiwan
Elissa Braunstein*
February, 2003
Research Brief 2003-2
If one accounts for the shift of women’s work from the household to the market  during
the course of economic development, what does the trajectory of growth and structural change
look like?  Economists do not typically consider this aspect of economic development.  But if a
significant proportion of growth is propelled by such a shift, then analyses of growth will
mistakenly attribute social and economic policies with production expansion when what is really
happening is a sectoral shift.
One would expect this oversight to be biggest in cases where economic growth is
accompanied by large increases in female market labor force participation.  In this brief, I
summarize an accounting of one such shift by looking at the role of women in Taiwanese growth
between 1965 and 1995, a thirty-year stretch when Taiwan had an enviable per capita market
growth rate of 6.9 percent.1  This growth was mirrored by changes in female labor force
participation, which increased from 33 percent in 1965 to 45 percent in 1995.  (At the same time,
male labor force participation experienced a steady decline, from 83 to 72 percent.) The
Taiwanese case is especially relevant to current debates about growth and development because
the female- and labor-intensive export-led growth model is still held up as one to emulate.
I estimate the effect of the shift of work from home to market by developing an
alternative measure of economic production that accounts for both market and household
production in the form of unpaid domestic services provided by women in the home.  The result
is a reevaluation of growth over the course of Taiwan’s export boom.  I find that social services,
a category that includes services provided in the market and the home, was the lead employer of
Taiwanese labor between 1965 and 1995.  Another key finding is that many of the factors
driving growth in the market sector also shape growth in the household sector.  Despite trend
declines in the relative size of the household sector, it has probably continued to grow throughout
                                                   
* Assistant Research Professor, Political Economy Research Institute, University of Massachusetts, Amherst.
1 A full accounting is contained in PERI Working Paper No. 24, available at www.umass.edu/peri.2
this period, primarily because of productivity gains in household production and the effects of
demographic change.  At the core of this conclusion is the assumption that opportunity wages are
a fair measure of the monetary value of women’s work in the home.
The Domestic Service Sector in Taiwan
Beginning with employment, how big is the unpaid domestic service sector relative to
other sectors in Taiwan?  Table 1 details the sectoral composition of the Taiwanese labor force at
various points in its industrial development.  It includes the category “housework,” the term used
to refer to the work of women engaged in unpaid household work full-time.  In 1965, the unpaid
domestic service sector was second only to agriculture in employment.  Later, agriculture
declined significantly and industry, especially manufacturing, became the main employer of
Taiwanese labor.  Even though the proportion of women working solely in the home declined,
the early dynamics of the demographic transition guaranteed continued expansion in the home
sector.
Table 1. Sectoral Composition of the Labor Force in Taiwan (thousands)
agriculture industry commerce
business
services
social
services housework
1965 1,748 1,019 389 40 568 1,667
1975 1,681 2,242 775 88 736 2,011
1985 1,297 3,466 1,336 190 1,114 2,491
1995 954 3,972 1,919 534 1,664 2,624
Notes:  Agriculture also includes forestry and fishing.  Industry includes manufacturing, mechanical and
mining.  Business services includes finance, insurance, real estate and business; social services includes
social, personal and public administration, all in the paid sector; housework denotes all those counted
outside the labor force who were classified as primarily engaged in “housekeeping.”
Source:  Directorate General of Budget, Accounting and Statistics, Statistical Yearbook of the Republic
of China, various years.
Table 2 presents the sectoral distribution by employment, but it also includes those whose
primary occupation was unpaid housework as a part of the labor force in the category “social
services.”  Looked at this way, social services has been the primary sectoral employer in Taiwan
since the beginning of its industrialization boom in the mid 1960s.    Even though industrial
employment gained a significant number of jobs, social services continued to hold its own.  This
interpretation provides a different perspective than that which is widely emphasized in the
literature.  Despite the shift away from agriculture and into industry that is often cited as a
marker of development, the importance of social services never appreciably waned.3
Table 2. Sectoral Distribution of the Total Labor Force in Taiwan
(percent of paid plus unpaid workers)
agriculture industry commerce
business
services
social
services
1965 32% 19% 7% 1% 41%
1975 22% 30% 10% 1% 36%
1985 13% 35% 14% 2% 36%
1995 8% 34% 16% 5% 37%
Note and sources:  See table 2, except for the category social services, which now includes those
counted as doing unpaid housework.  Paid plus unpaid workers equals the market labor force plus
those counted as doing unpaid housework.
These figures do mask, however, the shift in the relative size of the household sector as
expanding market growth drew more labor out of the home and into the marketplace.  In the next
section I will quantify these differences more precisely by assessing growth in the unpaid
domestic service sector in terms of the value of its labor inputs.
Growth and Structural Change in Market and Domestic Production
In order to estimate the value of women’s nonmarket household work in Taiwan, one
needs to derive an expression for the money value of women’s nonmarket production in terms
that can be estimated using available data.  The model I used is a simple model of household
production that renders the monetary value of household production in terms that include:  the
average female market wage; the elasticity of output with respect to labor inputs in the household
production function; the rate of substitution between household and market work; the average
work time of women who do no market labor; and the amount of household work done by
women who also have a job in the market.  A key assumption of the model is that market wages
are a reasonable estimate of the monetary value of women’s nonmarket work time. 
Starting off with a comparison of total market (M) and nonmarket (N) production, the
simulations indicate that the relative size of the household sector declined significantly, going
from about 31 percent of market sector size in 1965 to 17 percent in 1995.  But the decline is not
a consistent one.  There was an upswing in the size of the household sector in the mid-1970s that
will be discussed more completely below.  If one counts only housewives (leaving out the issue
of the rate of substitution between market and nonmarket work), the figures are 26 and 13
percent respectively.  Because of the substantial decline in nonmarket work when women take a
paying job that is assumed in this model, and because of the continued significance of full-time
housekeeping in the Taiwanese economy, women who work only in the home dominate the
trajectory of domestic production.
To what extent has this decline in the relative size of domestic production affected
extended (M+N) growth?  Table 3 presents five-year averages for per capita real growth rates of4
market, nonmarket, and extended (M+N) production. Accounting for the household sector pulls
down overall growth an average of 0.43 percent per year  between 1965 and 1995.  But the effect
varies in direction and magnitude over time.
Table 3. Comparing Market and Extended Per Capita Real Growth
in Taiwan, 1965-95
Market (M) only Nonmarket (N) only M + N
1965-69 6.00% 3.12% 5.33%
1970-74 8.07% 3.77% 7.17%
1975-79 8.01% 10.22% 8.42%
1980-84 5.43% 0.04% 4.43%
1985-90 7.24% 6.77% 7.16%
1991-95 5.67% 3.63% 5.36%
30-year avg 6.80% 4.71% 6.37%
Source:  Author’s calculations.  The key assumptions used here are that the rate of substitution
between market and nonmarket work is –0.75, meaning that for every hour worked in the market,
household labor time declines by 45 minutes, and that the elasticity of household output with
respect to labor inputs is 0.75.
In the first two decades considered (1965-84), the household sector had its greatest effect
on growth.  Between 1965 and 1974, slower growth in the household sector lowered extended
GDP growth rates by about 0.9 percent a year.  In the period 1975-79, however, the household
sector somewhat compensated for the oil crisis-induced slowdown in the market sector,
contributing an average of 0.41 percent a year to extended GDP growth and drawing it up to an
8.42 percent per capita growth rate.  This result is consistent with women’s market employment
being pro-cyclical – when the economy slows down, women’s work shifts back to the household
sector.
The next five year period, 1980-84, carried with it a recession in 1981-82 spurred by the
second oil crisis, but this time growth in the household sector lagged behind market GDP,
depressing extended per capita growth to an average of 4.43 percent a year as compared to 5.43
percent for per capita market growth.  There are two reasons for this.  The first is that female real
wage growth was significantly negative in the three (inflationary) years 1980-82, meaning that
the real value of domestic output declined as well (since it is valued using opportunity wages).
Secondly, the proportion of housewives in the working population declined in what became a
counter-cyclical pattern of women’s market employment, contrary to the late 1960s and early
1970s.
By the late-1980s, household sector growth continued to lag behind that of market GDP,
but the size of the consequent slowdown in extended GDP was much smaller than earlier periods
(0.09 percent in 1985-90 and 0.31 percent in 1991-95), primarily because the size of the
household sector relative to that of the market sector continued to decline throughout the entire
period.5
What is impressive about these figures is that despite the trend decline in the proportion
of women working at home full-time between 1965 and 1995, the nonmarket sector continued to
grow a per capita average of 4.71 percent.  Continued growth is to a large extent due to
productivity improvements (as measured by opportunity wages) in the household sector.  And to
a lesser extent growth is due to the age structure effect, where despite the decline in the
housewife participation rate, the number of women engaged primarily in unpaid housekeeping
has continued to increase since the mid 1960s.
What might these numbers look like if opportunity wages used to measure the household
sector stayed the same between 1965 and 1995, that is, there was no productivity growth in the
domestic sector?  Average per capita growth in the household sector would decline to –0.33
percent annually, a significant difference from the 4.71 percent figure when productivity is
allowed to increase along with the market sector’s.  Per capita extended (M+N) growth would
decline to an average of 5.95 percent a year, as compared to the 6.37 percent extended growth
and 6.8 percent market growth in table 3.  This difference is significant, but perhaps not as much
as one might expect in light of the dramatic declines in nonmarket sector participation.
The Role of Demographic Change
Population dynamics arose as a key determinant of the simulation results above.  The role
of demographic change is important because the demographic transition took record time in East
Asia.  In Europe, it took more than one hundred years.  In post-war East Asia, it took about
thirty, resulting in an incredibly compressed demographic gift to growth - the dramatic increases
in worker to population ratios throughout East Asia during the high growth decades.
There are two ways the demographic gift affected the nonmarket sector that are relevant
to the issue of growth and structural change.  First, the growth effects of the demographic
transition’s change in age structure are evident in the nonmarket as well as the market sector.
Even though the participation rate for full-time household work has been on the decline, the total
number of women choosing nonmarket work has continued to increase because of the peaks in
population growth in the 1950s. And even though many women have chosen paying jobs, they
still do some nonmarket work in the home.  Despite the decline in the proportion of women
doing full-time household work, the demographic gift contributed to continued growth in this
sector simply because the number of women doing any amount of housework relative to the
entire population increased so dramatically.
To understand the structure of this effect in the nonmarket sector, I use a measure I term
the “housekeeping dependency rate,” or the ratio of youth and old age dependents to women
doing full-time housework.  In 1965, this rate was 353, meaning that there were about 3.5 youth
and old age dependents per full-time housewife.  By 1995, this number had declined to 193,
giving 1.9 youth and old age dependents per full-time housewife. Even though these figures do
not account for the housework time of women in the paid labor force, it is clear that the sheer
numbers of women primarily engaged in housekeeping and continued fertility decline
sidestepped what might have been a contraction in the nonmarket sector.
How much did the demographic transition “give” to the nonmarket sector during this
period?  If one reruns the simulations maintaining the age structure in 1965 but letting all other6
factors vary, estimates for nonmarket growth rates decline by an average of three percentage
points, cutting these rates by about half.  Looking back at Table 3, that means nonmarket growth
only reaches a thirty-year average of 2.35 rather than 4.71 percent.  Depriving the nonmarket
sector of its demographic gift does not completely reverse its growth, but it does take out a
substantial proportion.
The second way that the demographic gift has affected the nonmarket sector is by
changing the composition of care.  As fertility declines and the population ages, less care time is
spent on young children and more on the elderly, with probably an overall decline in care time
relative to physical maintenance and management time.  These issues could also affect one’s
assessment of the productivity of nonmarket work – but only a more detailed analysis of time use
would offer the information necessary.
These points do indicate, though, that there is a potential down side to the demographic
gift, both in the nonmarket and market sectors.  The large cohort of workers with lower fertility
that swelled the relative ranks of the economically active population will eventually become
elderly, and the demographic gift could become a drain on the working-age population.  In terms
of the overall dependency rates covered above, although the rate continues to decline, the elderly
constitute an increasing share of dependents.  In 1965, those 65 and over constituted 5.6 percent
of all dependents; in 1995 that share had risen to 24 percent.
Conclusion
Raising the market labor force participation of women, especially women with high
levels of human capital (measured in terms of education and health) was a key feature of the
Taiwanese miracle.  These contributions were to some extent at the expense of the household
sector, but not as much as one might expect looking at the raw numbers due to productivity gains
in the household sector and the demographic gift.  Low unemployment and the continued
expansion of labor demand was an important partner in this course because real wage growth
made working for pay an avenue for expanding consumption and enhancing investments in
children, rather than a way to cope with economic hardship.
From a development perspective, the Taiwanese case contains some important lessons
about growth and structural change in extended production.  In the most general sense, it was
found that many of the factors driving growth in the market sector spurred growth in the
household sector as well, a finding that may seem counter-intuitive in light of the dramatic
changes in female labor force participation.  Enhancements in labor productivity and fertility
decline worked in similar ways in the two sectors, indicating the importance of productivity-
enhancing public investments in human as well as household capital.  These investments not
only augment labor’s direct contributions to growth, they also preserve production in the
household sector in ways that complement the continued supply of high-skilled labor.  Still, these
complementarities probably occurred in a context of increased total work time for women, where
women who worked for pay continued to provide some amount of nonmarket labor.
The gifts of productivity increases and fertility decline that underlie continued growth in
the household sector could slow down and even reverse in the near future.  As the relative
proportion of the elderly population grows, changes in the composition of care toward the elderly7
necessitate more careful thinking about how the composition of care affects the productivity of
nonmarket work, and about how social policy can help ensure that increased demands on the
household sector are met by increases in the productivity of labor rather than greater work loads
for women.   

Shifting Women’s Work from the Home to Market: Assessing Policies for Economic Growth in Taiwan

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Shifting Women’s Work from the Home to Market: Assessing Policies for Economic Growth in Taiwan

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