## EXECUTIVE SUMMARY

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---

### Why is increasing female labor force participation relevant?
- Europe faces declining potential output growth and an aging population, with the working-age population expected to continue to shrink and old-age dependency ratios rising.
- Gender gaps in labor market participation and senior corporate positions are sizable:
  - In 2014, only 89 women were working for every 100 men of prime working age.
  - As of April 2015, for every 100 corporate board members of large publicly listed firms, only 23 are women.
  - The corresponding female ratio is 16 out of 100 for top executive positions.
- Greater female involvement can deliver macroeconomic benefits through:
  - Increasing labor supply.
  - Improving firm financial performance.

### Key quantitative estimates and illustrative scenarios
- Closing the gender participation gap by increasing the number of women in the labor market would raise the European workforce by 6 percent.
- If the gap in hours worked by men and women were also eliminated, the workforce could increase by as much as 15 percent.
- According to the OECD, closing the gender participation gap could raise GDP by 12 percent over the next 15 years.
- Illustrative exercise assumptions: population and unemployment rate of both genders as well as the male labor force participation rate and number of hours worked for men remain constant; the exercise abstracts from the cohort dimension of participation gaps.

### Empirical findings on drivers and effects
- Women’s decision to work is influenced by policies and individual choice:
  - Tax policy treatment of a family’s second earner can affect incentives to take up work.
  - Public policies providing services that make it easier to combine employment with household and care responsibilities support women’s entry or return to the labor market.
- Strong positive association between firms’ gender diversity in senior positions and corporate financial performance:
  - Positive correlation more pronounced in sectors where women comprise a larger share of the labor force (for example, services sectors).
  - Correlation stronger in sectors where complementarities in skills and thinking—and greater creativity and innovative capacity—are in high demand (for example, high-tech and knowledge-intensive sectors).
- If higher involvement by women in senior positions improves firm profitability, it could help support corporate investment and productivity, mitigating the slowdown in Europe’s potential growth.

### Framing of policy relevance
- Closing the gender gap has stalled in many European countries despite:
  - Greater gender equality in human capital investment.
  - Declining birth rates.
  - Changing social norms.
  - Equal legal access to employment opportunities.

### Conclusions — Increasing labor supply
- The paper revisits the relative importance of demographic characteristics and policy variables in women’s employment decisions and disentangles effects from individual (or household) choice and macro-level policies.
- Key findings:
  - Demographics and attitudes play a significant role in driving women’s employment decisions.
  - Policies matter as well.
- Policy-relevant mechanisms identified:
  - Taxation (relative tax on the second earner can create disincentives).
  - Family-friendly policies (childcare spending, family allowances, parental leave).
  - Job structure (full-time versus part-time employment affects senior-position supply).

### Conclusions — Improving firm financial performance
- Data used: over 2 million firms in Europe.
- Findings:
  - Strong positive association between female representation in senior positions and firm financial performance.
  - Association particularly pronounced in high-tech and knowledge-intensive sectors and in sectors where women represent a large share of the workforce.
- Cross-sector and cross-country patterns:
  - Board quotas have raised board representation to about 18 percent, but only 12 percent of executive positions among Europe’s 620 largest listed companies were held by women in 2015.
  - In the broader corporate sector (Orbis database, 34 European countries), almost a quarter of senior positions are held by women (simple mean across the 34 countries).
  - A sizable gap remains between the gender composition of the workforce and the gender composition of senior positions.

### How has women’s labor supply evolved?
- Broad trends:
  - From participation rates of at most 40 percent in the early 1980s in several advanced European countries, most advanced countries now stand at about 80 percent for women ages 25–54 years (the EU 2014 average).
  - European female labor force participation is now almost on par with North America and East Asia and well above South Asia and the Middle East and North Africa.
- Cross-country dispersion and recent dynamics:
  - Progress has been uneven and has stalled in recent years for many countries.
  - Country examples: Spain and Luxembourg increased at a broadly constant pace over the past three decades; Malta’s female participation rate almost doubled in the past 15 years (from a very low level); progress in Italy has been much slower.
  - Participation ranges from about 65 percent in Italy to about 90 percent in Lithuania, Slovenia, and Sweden.
  - Gender participation gaps as of 2014: above 10 percent in a majority of countries; above 20 percent in Malta and Italy; about 5 percent in Sweden and Norway; virtually closed in Lithuania.
  - Gaps vary by age and education (e.g., Italy: gap most prevalent among people older than 30; Poland: gap narrows for people in their 40s and 50s).
- Hours and part-time work:
  - Average hours worked per week have remained broadly stable over the past decade in the average EU country, but there is substantial cross-country variation.
  - Examples:
    - Netherlands: high female participation coincides with more than half of women ages 25–54 employed part time.
    - Germany: women work about 30 hours per week, men nearly 40 hours per week.
    - Bulgaria: women and men work about 40 hours per week.
  - Part-time employment can raise participation but may also reflect policy-induced constraints (taxation or under-provision of childcare).

### Women in corporate leadership
- Quotas and boardroom representation:
  - Norway (since 2003) mandated at least 40 percent representation of each gender on the board of publicly listed companies; Germany requires at least 30 percent of supervisory seats by women as of 2016.
  - Quotas have supported a substantial rise in the share of women on the boards of Europe’s largest publicly listed companies.
- Executive positions and broader sectoral evidence:
  - Only 12 percent of executive positions among Europe’s 620 largest listed companies were held by women in 2015.
  - In the broader corporate sector (Orbis, 34 countries), almost 25 percent of senior positions are held by women (simple mean).
- Stylized facts on determinants:
  - Overall female labor force participation rate is not a good predictor of the share of women in senior positions.
  - There is a very strong negative association between the incidence of part-time employment among working women and the share of women in senior corporate positions, supporting supply-side explanations (shorter work hours, career breaks).
- Suggested contributors to underrepresentation:
  - Demand-side constraints: social norms and gender stereotypes, biased perceptions among bosses and voters, lack of exposure to female leaders.
  - Supply-side constraints: women’s shorter work hours, career choices related to childbearing.

### Do policies matter?
- Conceptual framing:
  - Both individual characteristics and policies affect a woman’s decision to work.
  - Individual characteristics include number of children, education, gender attitudes, marital status, intergenerational patterns (e.g., women with working mothers more likely to work).
- Empirical findings (micro-level analysis, Christiansen and others (2016a)):
  - Individual characteristics:
    - More education is associated with a higher probability of a prime-aged woman working, but education does not explain full-time versus part-time status.
    - Marriage does not significantly alter the employment decision overall (coefficient on "Married" is insignificant), but among working women married women tend to work shorter weeks than unmarried ones.
    - Each additional child is associated with a lower probability of a woman working.
    - A woman’s self-reported attitude toward working is a strong predictor of whether she is working.
    - Women who grew up with working mothers are more likely to work themselves.
  - Policies:
    - Higher relative tax rates on the second earner discourage women from participating in the labor force (particularly in advanced Europe) and from working full time.
    - Public spending on childcare and early childhood education is positively associated with the probability of employment (in particular in emerging Europe).
    - Lump-sum family allowances (cash transfers) may lessen the necessity for a woman to work.
    - More parental leave is associated with a higher likelihood of employment, though excessive parental leave may deter return to full-time work.
    - Changes in these policies matter more for women than for men, indicating policy-induced disincentives can be removed to help narrow the gender participation gap.
- Decomposition of changes between 2002 and 2012:
  - Positive evolution of attitudes toward women working helped lift women’s employment rates.
  - Policies also had significant influence after accounting for demographics and personal choice.
  - Examples:
    - Lower relative tax in Norway and the United Kingdom broadly supported female employment.
    - Increased childcare spending and reduced family allowance in the Czech Republic, Poland, and Norway positively contributed to higher female employment.
  - The decomposition attributes parts of the change in female employment rate (2002–12) to: Attitude, Demographic, Taxation, Childcare, Family allowance, Parental leave, and Other (time dummy and macro controls), and compares total predicted to actual change.

### Implications and policy considerations
- Policies that reduce disincentives for the second earner and increase public childcare and early education spending can raise female labor force participation and the likelihood of employment.
- Addressing part-time prevalence and job structure may be important for improving women’s access to senior positions and for firm performance, especially in high-tech and knowledge-intensive sectors.
- Country-specific policy recommendations would vary depending on initial conditions; changes in attitudes and demographics interact with policy effects and should be considered in designing reforms.

---

### Box 1 — What Shapes the Employment Decision for Women? (Summary of microdata analysis)

### Data and approach
- Individual-level data from the 2000 and 2012 rounds of the “Family and Changing Gender Roles” module of the International Social Survey Programme (ISSP) across 24 European countries.
- Model assesses extensive (whether a woman is employed) and intensive (number of hours worked/full-time vs part-time) margins.
- Main explanatory sets: individual characteristics (Z), policy variables (X), country and time fixed effects, controls for male employment rate and output gap. Regressions estimated with a linear probability model; robust standard errors clustered at the country-year level.

### Key empirical findings on individual characteristics
- Number of children: Adding one more child is associated with a 6 percentage point reduction in the likelihood of a woman working.
- Education increases likelihood of employment; does not affect hours worked for those already employed.
- Positive intergenerational transmission: women who grew up with working mothers are more likely to work.
- Attitudes: More egalitarian gender attitudes increase probability of labor force participation.
- Sample and fit:
  - Observations: 10,495 (all women: models 1 and 2), 8,174 (full-time vs part-time: model 3).
  - Adjusted R-squared: 0.1524 (model 1), 0.1535 (model 2), 0.1575 (model 3).

### Key empirical estimates (exact coefficients)
- Number of children: -0.0562*** (model 1), -0.0565*** (model 2), -0.0659*** (model 3).
- Education (years): 0.0378*** (1), 0.0391*** (2), 0.0047 (3).
- Education (years), squared: -0.0010*** (1), -0.0010*** (2), -0.0001 (3).
- Age (years): 0.0624*** (1), 0.0618*** (2), 0.0209*** (3).
- Age (years), squared: -0.0008*** (1), -0.0008*** (2), -0.0003*** (3).
- Mother working: 0.0220** (1), 0.0227** (2), 0.0175 (3).
- Married: -0.0001 (1), 0.0011 (2), -0.0626*** (3).
- Attitude (principal component): 0.0439*** (1), 0.0437*** (2), 0.0281*** (3).
- Tax on the second earner: -0.7531*** (1), -0.6557*** (2), -0.1016 (3).
- Childcare spending: 0.1168** (1), 0.1025*** (2), 0.0336 (3).
- Family allowance: -0.1048*** (1), 0.0328 (2).
- Parental leave: 0.1548*** (1), 0.2079*** (2), -0.1338*** (3).
- Parental leave, squared: -0.0004*** (1), -0.0007*** (2), 0.0005*** (3).

### Policy implications from microdata
- Relative taxation: design should minimize disincentives for the second earner (statistically and economically significant coefficients).
- Childcare vs lump-sum allowances: public spending on childcare encourages participation; lump-sum family allowances act in the opposite direction.
- Parental leave: inverted U-shaped relationship with employment; parental leave generally increases female employment but can become excessive. The optimal threshold is calculated on average at 140 weeks.
- Caveats: childcare availability is imperfectly proxied by childcare spending (percent of GDP); does not capture demographics, quality, or availability of full-time childcare services.

---

### Corporate Performance May Improve with Greater Female Representation

### Link from female labor attachment to senior positions
- Strong negative correlation across European countries between the share of women employed part time and the presence of women in senior corporate positions.
- Policy implication: boosting overall female labor supply and facilitating transitions from part-time to full-time employment could help narrow gender gaps in senior positions.

### Firm-level evidence on gender diversity and financial performance
- Data and measure:
  - Orbis database: unconsolidated financial statements of more than 2 million listed and unlisted companies across 34 European countries in 2013.
  - Sample selects firms with at least two people in senior management or on the corporate board and with gender information.
  - Financial performance measured as return on assets (ROA) using net income/total assets, profit before tax/total assets, and EBIT/total assets.
  - Gender diversity measured as share of women in senior positions.
- Main findings:
  - Firms with a larger share of women in senior positions have higher ROA.
  - Adding one more woman in senior management or on the corporate board, while keeping board size unchanged, is associated with an 8–13 basis points higher return on assets, or about 3–8 percent.
  - There is an inverted U-shaped relationship between the share of women in senior positions and firm performance; marginal returns turn negative beyond a certain point.
- Mechanisms and heterogeneity:
  - Female intensity channel: more pronounced in sectors where women form a larger share of the labor force. Example: In services (where more than 50 percent of employees are women), adding one more woman in senior positions is associated with a 20 basis points higher ROA.
  - Knowledge-intensity channel: positive association significantly higher in high-tech and knowledge-intensive sectors; larger increase in profitability from improving gender balance.
  - In sectors with low female intensity (e.g., construction), estimated ROA gains from adding one woman are smaller (about 6 basis points) and not statistically different from zero.

### Box 2 — regression framework and key coefficients (firm-level analysis)
- Regression: y = β * share_women + γ * firm_controls + α_country-industry + ε; controls include firm size, firm age, number of directors/senior managers, tangible assets; fixed effects ~16,000 country-industry dummies.
- Selected coefficients (exact reported values):
  - Share of Women in Senior Positions: 0.41*** (column 1), 0.44*** (column 2), -0.26 (col 3), -0.28 (col 4), 0.13 (col 5), 0.11 (col 6).
  - Interaction — Share of Women * Female Intensity of Sector: 1.63*** (col 2), 1.74*** (col 2 reported).
  - Interaction — Share of Women * High-Tech/Knowledge-Intensive Sector: 1.02*** (col 3), 1.19*** (col 4).
  - N Obs: 2,003,279 (columns 1,3,5), 2,000,422 (columns 2,4,6).
- Note on causality: causal interpretation is problematic because gender composition and firm performance are jointly determined; better-performing firms may attract more women, and unobserved firm characteristics may correlate with both.

### Box 2 — additional empirical findings and robustness
- Difference-in-difference strategy used to examine whether the effect of gender diversity is stronger in:
  - (1) industries that employ significantly more women in the labor force, and
  - (2) industries with greater demand for creativity and critical thinking (high-tech/knowledge-intensive).
- Key numerical findings:
  - For a firm in an industry in the top quartile in female intensity, replacing one man with a woman on the board or in senior management is associated with about a 20 basis points higher ROA.
  - In high-tech and knowledge-intensive sectors, adding one more woman could lead to about a 30 basis points higher ROA.
- Robustness:
  - Results robust to treatment of outliers, not driven by firms in a particular country, and robust to alternative performance measures such as labor productivity.
- Limitations:
  - Cross-sectional data prevents examination of association with volatility of returns.
  - Hard to distinguish whether benefits stem from gender composition of the workforce or technological characteristics of sectors.

### Policy implications and recommendations from Box 2
- Policies should focus on leveling the playing field to increase female labor force participation and support progression to senior positions.
- Drivers influencing women’s decision to work: more education, lower birth rates, exposure to working mothers, favorable attitudes toward women working.
- Specific policy levers:
  - Tax policy for the second earner should be carefully designed to avoid strong disincentives.
  - Public spending on childcare may support the return of mothers to work.
  - Lump-sum cash allowances may deter women from working through the income effect.
- Employment structure and career progression:
  - Increasing full-time employment among women is important for pipelines to senior positions; part-time employment may reduce prospects of reaching senior positions.
- Fiscal considerations:
  - Female-employment-friendly policies can entail short-term fiscal cost but yield long-term fiscal benefits via higher household incomes and taxable earnings.
- Scope and normative stance:
  - The paper focuses on raising measured GDP through higher female labor force participation and abstracts from other welfare implications; it does not take a normative stance on women’s participation.

*International Monetary Fund — Executive Summary, _eur1601*

### EXECUTIVE SUMMARY_______________________________________________________________________vii

### EXECUTIVE SUMMARY

### Why is increasing female labor force participation relevant?
- Europe faces declining potential output growth and an aging population, with the working-age population expected to continue to shrink and old-age dependency ratios rising.
- Gender gaps in labor market participation and senior corporate positions are sizable:
  - In 2014, only 89 women were working for every 100 men of prime working age.
  - As of April 2015, for every 100 corporate board members of large publicly listed firms, only 23 are women. The corresponding female ratio is 16 out of 100 for top executive positions.
- Greater female involvement can deliver macroeconomic benefits through two main channels:
  - Increasing labor supply.
  - Improving firm financial performance.

### Key quantitative estimates and illustrative scenarios
- Closing the gender participation gap by increasing the number of women in the labor market would raise the European workforce by 6 percent.
- If the gap in hours worked by men and women were also eliminated, the workforce could increase by as much as 15 percent.
- According to the OECD, closing the gender participation gap could raise GDP by 12 percent over the next 15 years.
- Illustrative exercise assumptions: population and unemployment rate of both genders as well as the male labor force participation rate and number of hours worked for men remain constant; the exercise abstracts from the cohort dimension of participation gaps.

### Empirical findings on drivers and effects
- The decision of women to work is influenced by policies as well as individual choice:
  - Tax policy treatment of a family’s second earner can affect incentives to take up work.
  - Public policies providing services that make it easier to combine employment with household and care responsibilities support women’s entry or return to the labor market.
- There is a strong positive association between firms’ gender diversity in senior positions and corporate financial performance.
  - This positive correlation is more pronounced in sectors where women comprise a larger share of the labor force (for example, services sectors).
  - The correlation is also stronger in sectors where complementarities in skills and thinking—and greater creativity and innovative capacity—are in high demand (for example, high-tech and knowledge-intensive sectors).
- If higher involvement by women in senior positions improves firm profitability, it could help support corporate investment and productivity, mitigating the slowdown in Europe’s potential growth.

### Framing of policy relevance
- Reexamining factors driving women’s labor force participation is important because the process of closing the gender gap has stalled in many European countries despite:
  - Greater gender equality in human capital investment.
  - Declining birth rates.
  - Changing social norms.
  - Equal legal access to employment opportunities.

*International Monetary Fund — Executive Summary, _eur1601*

### conclusions.

### conclusions

### Increasing labor supply
- The paper revisits the relative importance of demographic characteristics and policy variables in women’s employment decisions and disentangles effects from individual (or household) choice and macro-level policies.
- Key findings:
  - Demographics and attitudes play a significant role in driving women’s employment decisions.
  - Policies matter as well.
- Policy-relevant mechanisms identified:
  - Taxation (relative tax on the second earner can create disincentives).
  - Family-friendly policies (childcare spending, family allowances, parental leave).
  - Job structure (full-time versus part-time employment affects senior-position supply).

### Improving firm financial performance
- Data used: over 2 million firms in Europe.
- Findings:
  - Strong positive association between female representation in senior positions and firm financial performance.
  - The positive association is particularly pronounced in high-tech and knowledge-intensive sectors and in sectors where women represent a large share of the workforce.
- Cross-sector and cross-country patterns:
  - While board quotas have raised board representation to about 18 percent, only 12 percent of executive positions among Europe’s 620 largest listed companies were held by women in 2015.
  - In the broader corporate sector (Orbis database, 34 European countries), almost a quarter of senior positions are held by women (simple mean across the 34 countries).
  - A sizable gap remains between the gender composition of the workforce and the gender composition of senior positions.

### How has women’s labor supply evolved?
- Broad trends:
  - From participation rates of at most 40 percent in the early 1980s in several advanced European countries, most advanced countries now stand at about 80 percent for women ages 25–54 years (the EU 2014 average).
  - European female labor force participation is now almost on par with North America and East Asia and well above South Asia and the Middle East and North Africa.
- Cross-country dispersion and recent dynamics:
  - Progress has been uneven and has stalled in recent years for many countries.
  - Examples:
    - Spain and Luxembourg increased at a broadly constant pace over the past three decades; Malta’s female participation rate almost doubled in the past 15 years (from a very low level); progress in Italy has been much slower.
    - Participation ranges from about 65 percent in Italy to about 90 percent in Lithuania, Slovenia, and Sweden.
  - Gender participation gaps remain: as of 2014 the gender participation gap was above 10 percent in a majority of countries, and above 20 percent in Malta and Italy; about 5 percent in Sweden and Norway; virtually closed in Lithuania.
  - Gaps vary by age and education (e.g., Italy: gap most prevalent among people older than 30; Poland: gap narrows for people in their 40s and 50s).
- Hours and part-time work:
  - Average hours worked per week have remained broadly stable over the past decade in the average EU country, but there is substantial cross-country variation.
  - Examples:
    - In the Netherlands: high female participation coincides with more than half of women ages 25–54 employed part time.
    - Germany: women work about 30 hours per week, men nearly 40 hours per week.
    - Bulgaria: women and men work about 40 hours per week.
  - Part-time employment can raise participation but may also reflect policy-induced constraints (taxation or under-provision of childcare).

### Women in corporate leadership
- Quotas and boardroom representation:
  - Norway (since 2003) mandated at least 40 percent representation of each gender on the board of publicly listed companies; Germany requires at least 30 percent of supervisory seats by women as of 2016.
  - Quotas have supported a substantial rise in the share of women on the boards of Europe’s largest publicly listed companies.
- Executive positions and broader sectoral evidence:
  - Only 12 percent of executive positions among Europe’s 620 largest listed companies were held by women in 2015.
  - In the broader corporate sector (Orbis, 34 countries), almost 25 percent of senior positions are held by women (simple mean).
- Stylized facts on determinants:
  - Overall female labor force participation rate is not a good predictor of the share of women in senior positions.
  - There is a very strong negative association between the incidence of part-time employment among working women and the share of women in senior corporate positions, supporting supply-side explanations (shorter work hours, career breaks).
- Suggested contributors to underrepresentation:
  - Demand-side constraints: social norms and gender stereotypes, biased perceptions among bosses and voters, lack of exposure to female leaders.
  - Supply-side constraints: women’s shorter work hours, career choices related to childbearing.

### Do policies matter?
- Conceptual framing:
  - Both individual characteristics and policies affect a woman’s decision to work.
  - Individual characteristics include number of children, education, gender attitudes, marital status, intergenerational patterns (e.g., women with working mothers more likely to work).
- Empirical findings (micro-level analysis, Christiansen and others (2016a)):
  - Individual characteristics:
    - More education is associated with a higher probability of a prime-aged woman working, but education does not explain full-time versus part-time status.
    - Marriage does not significantly alter the employment decision overall (coefficient on "Married" is insignificant), but among working women married women tend to work shorter weeks than unmarried ones.
    - Each additional child is associated with a lower probability of a woman working.
    - A woman’s self-reported attitude toward working is a strong predictor of whether she is working.
    - Women who grew up with working mothers are more likely to work themselves.
  - Policies:
    - Higher relative tax rates on the second earner discourage women from participating in the labor force (particularly in advanced Europe) and from working full time.
    - Public spending on childcare and early childhood education is positively associated with the probability of employment (in particular in emerging Europe).
    - Lump-sum family allowances (cash transfers) may lessen the necessity for a woman to work.
    - More parental leave is associated with a higher likelihood of employment, though excessive parental leave may deter return to full-time work.
    - Changes in these policies matter more for women than for men, indicating policy-induced disincentives can be removed to help narrow the gender participation gap.
- Decomposition of changes between 2002 and 2012:
  - Using the empirical results in Box 1, decomposition across countries suggests:
    - Positive evolution of attitudes toward women working helped lift women’s employment rates.
    - Policies also had significant influence after accounting for demographics and personal choice.
    - Examples of policy contributions:
      - Lower relative tax in Norway and the United Kingdom broadly supported female employment.
      - Increased childcare spending and reduced family allowance in the Czech Republic, Poland, and Norway positively contributed to higher female employment.
  - The decomposition attributes parts of the change in female employment rate (2002–12) to: Attitude, Demographic, Taxation, Childcare, Family allowance, Parental leave, and Other (time dummy and macro controls), and compares total predicted to actual change.

### Implications and policy considerations
- Policies that reduce disincentives for the second earner and increase public childcare and early education spending can raise female labor force participation and the likelihood of employment.
- Addressing part-time prevalence and job structure may be important for improving women’s access to senior positions and for firm performance, especially in high-tech and knowledge-intensive sectors.
- Country-specific policy recommendations would vary depending on initial conditions; changes in attitudes and demographics interact with policy effects and should be considered in designing reforms.

*Source: INTERNATIONAL MONETARY FUND*

### Box 1. What Shapes the Employment Decision for Women?

### Box 1. What Shapes the Employment Decision for Women?

### Drivers of female employment: individual attitudes and policies
- Research question: To what extent do women’s decisions to work reflect individual preferences, and can removing policy distortions and improving public provision of services further boost female labor force participation in Europe?
- Data and approach:
  - Individual-level data from the 2000 and 2012 rounds of the “Family and Changing Gender Roles” module of the International Social Survey Programme (ISSP) across 24 European countries.
  - Model assesses extensive (whether a woman is employed) and intensive (number of hours worked/full-time vs part-time) margins of female employment.
  - Main explanatory sets: individual characteristics (Z), policy variables (X), country and time fixed effects, controls for male employment rate and output gap. Regressions estimated with a linear probability model; robust standard errors clustered at the country-year level.

### Key empirical findings on individual characteristics (Table 1 / regressions)
- Number of children: Adding one more child is associated with a 6 percentage point reduction in the likelihood of a woman working.
- Education: More education increases women’s likelihood of employment; education does not affect the number of hours worked for those already in the labor force.
- Age: Positive relationship with employment probability (age and age squared included).
- Mother working: Positive intergenerational transmission — women who grew up with working mothers are more likely to work as adults.
- Marital status: Married women in Europe are not less likely to work; married working mothers are more likely to work less than full time.
- Attitudes: Women with more egalitarian gender attitudes are more likely to be active in the labor market.
- Sample and fit (employment regressions):
  - Observations: 10,495 (all women: models 1 and 2), 8,174 (full-time vs part-time: model 3).
  - Adjusted R-squared: 0.1524 (model 1), 0.1535 (model 2), 0.1575 (model 3).

### Key empirical estimates from Table 1 (preserve exact reported coefficients and significance)
- Number of children: -0.0562*** (model 1), -0.0565*** (model 2), -0.0659*** (model 3).
- Education (years): 0.0378*** (1), 0.0391*** (2), 0.0047 (3).
- Education (years), squared: -0.0010*** (1), -0.0010*** (2), -0.0001 (3).
- Age (years): 0.0624*** (1), 0.0618*** (2), 0.0209*** (3).
- Age (years), squared: -0.0008*** (1), -0.0008*** (2), -0.0003*** (3).
- Mother working: 0.0220** (1), 0.0227** (2), 0.0175 (3).
- Married: -0.0001 (1), 0.0011 (2), -0.0626*** (3).
- Attitude (principal component): 0.0439*** (1), 0.0437*** (2), 0.0281*** (3).
- Tax on the second earner: -0.7531*** (1), -0.6557*** (2), -0.1016 (3).
- Childcare spending: 0.1168** (1), 0.1025*** (2), 0.0336 (3).
- Family allowance: -0.1048*** (1), 0.0328 (2).
- Parental leave: 0.1548*** (1), 0.2079*** (2), -0.1338*** (3).
- Parental leave, squared: -0.0004*** (1), -0.0007*** (2), 0.0005*** (3).

### Policy implications from microdata analysis
- Relative taxation: The coefficient on the relative tax rate of the family’s second earner (usually a woman) is statistically and economically significant; tax design should minimize disincentives for women to work.
- Childcare vs lump-sum allowances: Higher spending on childcare services (public spending on early child education and childcare, percent of GDP) encourages female participation; lump-sum family allowances act in the opposite direction.
- Parental leave design: There is an inverted U-shaped relationship between weeks of parental leave and female employment; parental leave generally increases female employment but can become excessive. The optimal threshold is calculated on average at 140 weeks.
- Caveats: Childcare availability is imperfectly proxied by childcare spending in percent of GDP; this measure does not capture demographics, quality of provision, or availability of full-time childcare services — important for full-time vs part-time employment regressions.

---

### Corporate Performance May Improve with Greater Female Representation

### Link from female labor attachment to senior positions
- Part-time employment and senior representation: Strong negative correlation across European countries between the share of women employed part time and the presence of women in senior corporate positions.
- Policy implication: Policies that boost overall female labor supply and facilitate transitions from part-time to full-time employment could help narrow gender gaps in senior positions.

### Firm-level evidence on gender diversity and financial performance
- Data and measure:
  - Orbis database: unconsolidated financial statements of more than 2 million listed and unlisted companies across 34 European countries in 2013.
  - Sample selects firms with at least two people in senior management or on the corporate board and with gender information.
  - Financial performance measured as return on assets (ROA) using net income/total assets, profit before tax/total assets, and EBIT/total assets.
  - Gender diversity measured as share of women in senior positions.
- Main findings:
  - Firms with a larger share of women in senior positions have higher ROA.
  - Adding one more woman in senior management or on the corporate board, while keeping board size unchanged, is associated with an 8–13 basis points higher return on assets, or about 3–8 percent.
  - There is an inverted U-shaped relationship between the share of women in senior positions and firm performance; marginal returns turn negative beyond a certain point.
- Mechanisms and heterogeneity:
  - Female intensity channel: Positive association is more pronounced in sectors where women form a larger share of the labor force. Example: In services (where more than 50 percent of employees are women), adding one more woman in senior positions is associated with a 20 basis points higher ROA.
  - Knowledge-intensity channel: Positive association is significantly higher in high-tech and knowledge-intensive sectors; these sectors show a much larger increase in profitability from improving gender balance in senior positions.
  - In sectors with low female intensity (e.g., construction), estimated ROA gains from adding one woman are smaller (about 6 basis points) and not statistically different from zero.

### Box 2 — regression framework and key coefficients (firm-level analysis)
- Regression specification: y = β * share_women + γ * firm_controls + α_country-industry + ε, where y is ROA and share_women is the share of women in senior positions; controls include firm size, firm age, number of directors/senior managers, tangible assets; fixed effects are roughly 16,000 country-industry dummies.
- Table 1 (selected coefficients, preserve exact reported values and significance):
  - Share of Women in Senior Positions: 0.41*** (column 1), 0.44*** (column 2), -0.26 (col 3), -0.28 (col 4), 0.13 (col 5), 0.11 (col 6).
  - Interaction — Share of Women * Female Intensity of Sector: 1.63*** (col 2), 1.74*** (col 2 reported).
  - Interaction — Share of Women * High-Tech/Knowledge-Intensive Sector: 1.02*** (col 3), 1.19*** (col 4).
  - N Obs: 2,003,279 (columns 1,3,5), 2,000,422 (columns 2,4,6).
- Note on causality: While coefficients are robust controlling for granular fixed effects and firm characteristics, causal interpretation is problematic because gender composition and firm performance are jointly determined; better-performing firms may attract more women, and unobserved firm characteristics may correlate with both.

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*Source: IMF staff estimates, based on ISSP microdata and Orbis firm data as described in the source document.*

### Box 2. The Importance of Women in Senior Positions (concluded)

### Box 2. The Importance of Women in Senior Positions (concluded)

### Identification strategy and empirical specification
- The study uses a simple difference-in-difference strategy to shed light on the causal effect of greater female participation in senior positions.
- Identifying assumption: if gender diversity in management can help improve firm performance, its effect must be stronger in:
  - (1) industries that employ significantly more women in the labor force, and
  - (2) industries with greater demand for the creativity and critical thinking that diversity may bring.
- Estimated specification (as presented):
  - y_inc = δ * SEC_n * sh_wmn_inc + β * sh_wmn_inc + γ * x_inc + α_nc + ε_inc  (2)
  - SEC_n is alternatively (1) the female intensity of the sector to which the firm belongs and (2) an indicator for whether the sector is a high-tech or knowledge-intensive sector.

### Key empirical findings
- Strong evidence for both channels (female-intensive sectors and high-tech/knowledge-intensive sectors).
- Sectoral heterogeneity:
  - For a firm in an industry in the top quartile in terms of female intensity, replacing one man with a woman on the board or in senior management is associated with about a 20 basis points higher ROA.
  - For a firm in a sector with no women in its labor force, the associated change is not statistically different from zero or is slightly negative.
  - In high-tech and knowledge-intensive sectors, adding one more woman on the board or in senior management, while keeping the size of the board unchanged, could lead to about a 30 basis points higher ROA.
  - These sector-specific effects are reported in Table 1, columns 3 and 4 (female intensity) and columns 5 and 6 (high-tech/knowledge-intensive).
- Robustness:
  - Findings are robust to the treatment of outliers.
  - Results are not driven by firms in a particular country.
  - Results are robust to using alternative measures of firms’ performance, such as labor productivity.
- Limitations:
  - Cross-sectional nature of the data prevents examination of the association between gender diversity and volatility of returns.
  - In equilibrium, it is difficult to empirically distinguish between theories on why greater representation of women in senior positions improves firm performance: sectors that would benefit from gender diversity because of technological characteristics already have higher prevalence of women in the labor force, making it hard to conclude confidently whether it is the gender composition of the workforce or the nature of technology that matters for women’s value added in senior positions.

### Policy implications and recommendations
- Policies should focus on leveling the playing field to increase female labor force participation and support progression to senior positions.
- Drivers that influence women’s decision to work:
  - More education, lower birth rates, exposure to working mothers, and favorable attitudes toward women working are important drivers.
  - Supportive policies matter even after accounting for these factors.
- Specific policy levers:
  - Tax policy for the second earner in the family should be carefully designed because it could strongly shape incentives for or against work.
  - Public spending on childcare may support the return of mothers to work.
  - Lump-sum cash allowances may deter women from working through the income effect.
- Employment structure and career progression:
  - Having more women in the labor force paves the way for greater diversity in senior corporate positions and higher firm performance, particularly in services and high-tech/knowledge-intensive sectors.
  - Policies should aim to remove disincentives for full-time employment. Part-time employment, while a useful entry point, may reduce prospects of reaching senior positions.
  - The strong positive association between the incidence of full-time employment among working women and the share of women in senior positions suggests the current low representation in boardrooms or senior positions may be partly due to scarcity of candidates willing or able to take on more responsibilities.
- Fiscal considerations:
  - Although female-employment-friendly policies can entail a fiscal cost in the short term, there would be long-term (fiscal) benefits through support of women’s long-term attachment to the labor force, full-time employment, and thereby, households’ income levels (which would be taxed).
- Scope and normative stance:
  - The paper considers boosting female labor force participation for raising measured GDP but abstracts from other welfare implications of women’s switch between household work and labor force participation and does not take a normative stance on women’s participation in the labor force.
  - The emphasis is on the importance of leveling the playing field through policy actions and providing services to allow women to reach their full employment potential if they choose.

*Source: Box 2. The Importance of Women in Senior Positions (concluded), _eur1601*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/dp/2016/_eur1601.pdf_