She Works Hard for the Money: A BDSGE Approach to Analyzing Gender Targeted Reforms in South Korea

Abstract

This paper uses Bayesian techniques to estimate a dynamic stochastic general equilibrium(DSGE) model for the Republic of Korea and conducts policy simulations toanalyze the macroeconomic effects of gender-targeted reforms. The baseline modeldraws heavily from Fernández-Villaverde and Rubio-Ramírez (2006) and featuressticky prices and wages and various structural shocks. We find that the model providesa reasonable description of the Korean economy. Testing the model against analternative monetary policy specification, we find evidence that the Bank of Koreaputs strong emphasis on smoothing interest rates and achieving price stability.We next introduce the role of gender by differentiating male and female laborinputs, with gender gaps in labor hours and wages arising from the presence ofconstraints on female labor supply and demand that correspond to limited accessto resources like childcare, gender-biased social norms, and discriminatory hiringpractices. We find that a 10% negative shock to firm discrimination leads to a 6.5%decrease in the labor hours gap, a 10% decrease in the wage gap, and a 1% increasein GDP. A 10% negative shock to the constraint on female labor supply leads to a2.5% decrease in the labor hours gap, a 3% decrease in the wage gap, and a 0.6%increase in GDP. Changes are reported as percentage deviations from steady state.