Year

2017

Degree Name

Doctor of Philosophy

Abstract

Malaysia experienced rapid economic growth and an increased standard of living between 1970 and 2010. During this period, female educational attainment has also increased substantially, and the fertility rate declined. Curiously though, the rate of female labour force participation experienced only moderate growth in the span of these four decades. The underutilisation of trained human resources deteriorates the stock of human capital and therefore may be costly to a country. From the Malaysian perspective, understanding the determinants of female labour supply is of particular interest especially for policymakers considering the country’s goal to increase the rate of female labour force participation rate to 57% by the year 2020. The main purpose of this thesis is therefore to identify the key determinants of female labour force participation in Malaysia and their changing impacts over time. This thesis presents three complementary empirical analyses on the issue of female labour force participation with an emphasis on education and fertility using data drawn from the various Malaysia Population and Housing Censuses.

In the first empirical chapter, the change in the female labour force participation rate between 1970 and 2000 in Peninsular Malaysia was decomposed into changes in characteristics and coefficients using Fairlie’s (1999; 2005) non-linear decomposition method, which is an extension of the Blinder-Oaxaca (1973) decomposition method. The estimates using Fairlie (1999; 2005) decomposition reveals that the majority of the change in female labour force participation rate can be attributed to the change in characteristics on both the education and fertility variables.

The second empirical analysis in this thesis offers new evidence on the causal effect of higher education on female labour force participation. The difference-indifferences strategy shows that a higher education reform in Malaysia increases the tertiary educational attainment among females by 2.7 percentage points. Subsequently, by exploiting the reform in higher education as an exogenous source of variation in education, the results estimated using the instrumental variable strategy establish that higher education has a positive causal effect on female labour force participation. This result points to the fact that investment in education should continue to be the country’s priority.

In the third empirical contribution, the instrumental variable strategy was used to identify the causal effect of fertility on female labour force participation. The findings from the instrumental variables strategy indicate that fertility has a larger negative effect on female labour force participation for planned births as compared to unplanned births, at 15.5% and 6%, respectively. The estimates in this analysis, using the multiple births and sibling-sex composition as instrumental variables, are consistent with that in the developed countries, including the US and Australia. In Malaysia, where ethnic heterogeneity is the central focus of any public policy, the causal effect of fertility on female labour force participation by ethnicity is examined. Fertility has a larger negative effect among the Bumiputera than the non- Bumiputera women. Chinese women have strong son preference. However, the causal effect of fertility on female labour force participation, examined using son preference instrument is not significant.

This thesis advances the literature in the area of female labour force participation in several ways. First, this is one of the few decomposition analyses exploring the drivers of trends in female labour force participation globally. Second, this is one of few studies that examined the causal effect of higher education on female labour force participation. Third, the causal effect of fertility on female labour force participation is analysed by taking into account the behaviour among females of different ethnicities within the same labour market institutions. Finally, in the local context of Malaysia, this study addressed the issues of endogeneity in education and fertility on female labour force participation, which to date has been limited. The findings in this thesis have important policy implications. While the Malaysian Government should continue to focus on improving access to education, the most pressing issue is to design policies that could improve work-life balance in order to encourage greater growth in female labour force participation in Malaysia.

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