Relative employment and earnings of female household heads in Mexico, 1987-1995

This study analyzes the determinants of employment and earnings for female-headed households from 1987 to 1995 in Mexico. During those years, the percentage of female-headed households and their employment rate substantially increased. The paper explores the possible causes for the relative changes in labor market outcomes for both female and male-headed households. We use individual-level household survey data from Mexico's Encuesta nacional de empleo urbano for the third quarter of 1987 and 1995. Our findings show that the gender educational gap substantially closed, the percentage of divorced female household heads increased, and the percentage of widows fell. From 1987 to 1995, the average number of children decreased by about one child (from 4.79 to 3.72). In addition, the wages of female heads grew significantly faster than that of their male counterparts, and this contributed to a reduction in the gender wage gap ratio from 24.9 to 19.3 percent during the 1987-1995 period. Also, we find that from 1987 to 1995, the rate of return to education increases for both male and female household heads, but the rate is higher for males than for females. As we would expect, wages increase with experience but at a decreasing rate. Furthermore, our finding shows that wage premium for being employed in the public sector is much higher for females than for males, and it actually increased from 22.4 percent in 1987 to 30.6 percent by 1995.