Maids and mistresses : migrating maids and female labor force participation

We model the linkage between immigration of maids and intersectoral movements of female family labor in a small open economy with a competitive factory sector and a household sector which employs both immigrant maids and family labor. We show that relaxing immigration restrictions on maids will not necessarily increase participation by family labor in the formal workforce. We also show that reducing taxes on employment of maids will not necessarily increase labor force participation by local women – instead, imposing a tax (where there are none) may trigger such an increase depending on maids' and locals'' relative propensities to consume household sector output. Our analysis sheds light on one facet of the penetration of the household sector by market forces and yields some unexpected policy implications.