Real effective exchange rate shocks and job quality by gender in Latin America

Abstract

Despite significant improvements in women's education, labor force participation, and health outcomes, labor market segregation by gender persists in Latin America, with negative consequences for gender equality. Our paper analyzes demand-side explanations for this phenomenon, focusing on the impact of real effective exchange rates (REER) on job quality by gender in the region. Gender segregation is central to the gender distribution of job quality, which is defined in terms of an occupation's wage relative to the national median wage. Combining a panel of micro-level surveys with macroeconomic data from 15 Latin American countries between 1991–2018, we use a generalized difference-in-difference model to map how REER shocks impact the availability of good jobs for women and men. We argue that REER shocks change the sectoral composition of GDP, which impacts gender equality due to high vertical and horizontal segregation. Results indicate that medium appreciation shocks are associated with a decline in men's good job share, raising gender equality but through a “race-to-the-bottom” dynamic rather than as a manifestation of women's climb to the top. Despite the adoption of macroeconomic policies associated with appreciated real exchange rates throughout the region, larger appreciation shocks are rare and tend to increase women's good job share. Very large depreciation shocks are associated with an increase in women's good job share and a greater-than-proportional decrease in men's good job share, resulting in a rise in women's relative share of good jobs. These results point to new policy challenges and the need for gender-aware macroeconomic policy analysis.