Why do Japanese women work so much less than Japanese men? A business cycle accounting approach

•The difference between the male and female labor wedges has been decreasing in Japan.•Productivity, housework, and discrimination account for 71 of the female labor wedge.•If the female labor wedge is equal to male one, welfare could increase by 1.44.

To investigate why female labor supply is lower than male labor supply in Japan, we extend the business cycle accounting approach of Chari et al. (2007, Econometrica, vol. 75, pp. 781-836). We first apply business cycle accounting with two labor types of supply to the Japanese economy and find that the difference between the male and female labor wedges has been decreasing. We then prove that our prototype model comprising male and female labor supply concurs with other detailed models that include frictions on female labor supply and that decompose the labor wedges by gender into these frictions. Based on the data, the frictions from the difference in labor productivity, home production, and discrimination are consistent with the female labor wedge from the prototype model. Moreover, we conduct a counterfactual experiment in which the female labor wedge is equal to the male wedge to estimate the welfare gains. The result shows that the welfare gains are approximately equal to a 1.44% increase in consumption.