Unpacking the link between service sector and female employment: cross‐country evidence

Abstract This paper documents significant cross‐country variation in the strength of the service sector pulling women into the market work. We find the composition of the service sector to be the crucial driver of this heterogeneity. Specifically, a larger public administration sector is associated with lower elasticity, while a higher female share within business services has a positive association. The relationship between female share within business services and elasticity also depends on the size of the food and accommodation services, reflecting a marketization channel. Service sector composition alone explains 54% of the cross‐country variation, rising to 60% when controlling for labour market policies. These findings show that the sub‐sectoral structure of the service sector is the critical determinant of its ability to pull women into market work.