Download Gender and Its Relevance to Macroeconomic Policy: A Survey

Gender and Its Relevance to
Macroeconomic Policy: A Survey
Janet G. Stotsky
International Monetary Fund
Purpose of Study
• Assess the relevance of gender
differences for macroeconomic policy
• Gender differences have long been
incorporated into models in development,
public finance, and labor economics
• Gender differences in a macro context
have been examined more recently
Issues
• Differences in aggregate consumption,
investment, and risk taking behavior and in
preferences for public sector role
• Relationship between women’s economic
status and economic growth
• Labor market, trade, and financial market
developments
• IMF and World Bank programs
Gender Differences in Behavior
and Macroeconomic Outcomes
• Gender differences in behavior may influence key
macroeconomic outcomes
• The analytical underpinnings in microeconomic theory
• Household production where time is an important input
• Human capital is an important product of the household
• Multiple decision makers within the household, thus
household members may respond differently to the
economic environment and economic policies may affect
household members differently
Consumption Behavior
• Private consumption is the largest
component of aggregate demand; thus
understanding consumption is key
• Permanent income, life cycle model
• Consumption behavior via savings and
investment is linked to external stability
Consumption behavior evidence
• Two strands of evidence:
• Women have a stronger preference for
spending on goods and services that
contribute to human capital accumulation
of their children and are household
necessities
• Evidence on this comes from many
countries in the developing world
Consumption behavior evidence
continued
• Price and income elasticities differ though
differences tend to narrow as income rises
• Price elasticities of demand for education (both
enrollment and years of schooling) are higher in
absolute terms for females than males
• Income elasticities also are higher for females
than males
• Two stage decision: decision to educate and
then how much to spend, given the decision is
made to educate
Implications of Consumption
Behavior Differences
• Raising the share of spending over which
women have control benefits children and raises
human capital
• It also tends to stabilize spending by increasing
the proportion spent on necessities
• Price and income elasticity evidence suggests
that relative price increases and income declines
are more harmful to female access to education
and health care
Savings and Investment Behavior
• Theories of saving include smoothing consumption,
bequest and investment motives, precautionary
purposes
• Savings behavior may reflect a greater degree of
uncertainty and a lack of access to formal markets
• Women may have greater incentive to save because of
their role as home builders, greater life expectancy, and
stronger bequest motives
• Differential access to financial markets may also
influence
• Empirical work suggests that as women have greater
earnings capacity relative to men, savings increases but
evidence is scant
Risk Preferences
• A number of studies have also examined risk
preferences, mainly using developed countries
owing to absence of data elsewhere
• Women tend to be more risk averse
• Risk pooling may also differ and evidence from
developing countries
• Micro credit evidence suggests women have
superior repayment record and use loans more
productively
Public Choice
• A number of studies have examined the impact
of giving women the right to vote
• Women’s suffrage has led to a greater growth of
government and tendency toward greater
“liberalism”
• Women tend to support greater redistributive
spending and public forms of insurance
• The economic implications of a larger
government role are ambiguous
Summing Up
Gender Differences in Macroeconomic
Behavior
• Improving women’s control of household
resources may lead to higher levels of human
capital spending, more stable consumption
behavior, greater investment, and lower risk
taking
• Increasing women’s political influence may lead
to a greater role for redistributive fiscal policies
and public insurance
• Upshot: more growth and lower risk, though
some ambiguities remain
Gender Inequalities and Growth: A
Simultaneous Relationship
• Neoclassical growth theory relates
economic growth to capital accumulation
• Endogenous growth models allow for a
larger set of variables and do not require
production to have diminishing returns in
inputs
• Human capital is an important contributor
to higher growth
Gender Considerations in Growth
Models
• Endogenous growth models can
incorporate gender considerations through
time as an input, education, and human
capital accumulation
• Evidence suggests that reducing gender
inequality leads to higher growth and
higher growth leads to reduced gender
inequality
Gender Inequalities in Education,
Health, and Social Capital on Growth
• A number of researchers have examined this
relationship (Dollar and Gatti, 1999; Knowles et
al, 2002; Klasen, 2002)
• Generally the finding is that female education
leads to higher growth
• Inequality leads to an inability to take advantage
of beneficial conditions and lower agricultural
productivity (Blackden and Bhanu, 1999)
• Education, health capital, and governance
improve growth and gender equality leads to
more education for females (Baldacci et al,
2004)
Effect of Economic Growth on
Gender Inequalities
• Forsythe et al (2000) use panel data to
investigate how growth affects gender
inequalities
• They find a simultaneous relationship,
though measurement varies with the
specification
• A number of UN indexes try to measure
gender inequality and relate to level of
income
Gender Inequalities in Labor and
Financial Markets
• Unpaid economy is significant
• The omission of it in economic models
hinders a full assessment of economic
changes
• The substitution of paid and unpaid labor
• The opportunity cost of time
• Economic adjustment has implications for
time burdens in the household
Labor Markets and Export-Oriented
Manufacturing
• Globalization is changing the world’s economy
• Trade liberalization is an important change and
has led to the growth of export oriented
manufacturing
• A number of studies have examined the
influence of trade liberalization on the labor
market roles of women
• The conclusions are that it has has led to greater
job growth but ambiguous effects on relative
wages
Aid Inflows and Macroeconomic
Changes
• Aid inflows can have differential effects by
gender
• Aid inflows can put upward pressure on
exchange rates
• This might be helpful to women trapped in
subsistence economy but harmful to those
who can benefit from export oriented trade
Capital Markets and Financial
Liberalization
• Financial liberalization is also changing the
world’s economy
• Financial liberalization is beneficial but can lead
to greater instability
• Women cannot always benefit if their access to
financial markets is limited
• Instability may have disproportionately harmful
effects on women
• Foreign direct investment may lead to more use
of subcontractors, including home based with
some benefits to women
Summing Up
Gender Inequalities in Labor and
Financial Markets
• Removal of impediments to labor force
participation is important
• Exchange rate changes interact with labor
market structures
• Financial liberalization has ambiguous
effects by increasing access but also
increasing instability
Gender, Economic Instability, and
Adjustment
• Macroeconomic fluctuations are pervasive and
may lead to fiscal and financial distress
• Fiscal austerity is often a by-product of distress,
especially to improve external sustainability by
reducing domestic demand
• Fiscal retrenchment can take different forms, on
both revenue and spending side, with differential
effects by gender
Fiscal Austerity and Gender
• Higher fees for government services,
especially for health and education, may
disproportionately affect females
• Tax changes are not gender neutral
• Reduction in services may also have
differential effects both directly and
indirectly through time burdens
Labor Market Fluctuations
• Labor market fluctuations affect men and women
differently
• In the U.S., men’s wages exhibit greater
procyclicality
• Developing country evidence is scarce on this
issue
• Public sector employment cuts may
disproportionately affect women
• But women’s private sector employment may be
more resilient in a downturn
Structural Adjustment
• IMF and World Bank structural adjustment
has been criticized for being
disproportionately harmful to women
• The reasons include the fiscal austerity
and labor market effects
• Important to distinguish short and longer
term effects of adjustment programs
Structural Adjustment and
Exchange Rate Changes
• Structural adjustment is often accompanied by
exchange rate depreciation which affects the
relative profitability of export industries
• Where women are mainly limited to subsistence
activities, depreciation may be harmful in that
they cannot benefit from improved environments
for export
• If accompanied by fiscal austerity, this can be a
double blow
Structural Adjustment and Gender
• World Bank (2001) examined how gender
equality evolved in countries undergoing
structural adjustment in the 1980s and
early 1990s. Focusing on Sub-Saharan
Africa, it found programs did not have
outcomes that differed significantly by
gender
• Another study (Forsythe et al, 2000) found
something similar for IMF programs
Structural Adjustment and
Education
• Several studies have examined the effect
of structural adjustment on education
• Rose (1995) found a negative impact of
World Bank programs on female education
• Buchmann (1996) found the same for IMF
programs
Poverty Reduction and Growth
Facility
• The PRGF was introduced in 1999
• It is intended to increase the emphasis in
low-income countries on pro-poor and progrowth policies, fiscal flexibility, and better
governance
• A 2002 IMF review found that the
composition of spending had evolved in
pro-poor and pro-growth ways under early
PRGF programs
Sum Up
• Empowering women in the economy can
enhance growth and provide stability
• There may be less risk taking and greater
role for government
• Economic growth and gender inequality
have a simultaneous relationship and the
evidence suggests that growth leads to
lower inequality and vice versa
Sum Up continued
• In countries based on subsistence
agriculture, women’s inequality may limit
their ability to take full advantage of better
macroeconomic and microeconomic
conditions
• Exchange rate depreciation is harmful to
women limited to a subsistence economy
Sum Up continued
• Where women have opportunities for
export oriented industry, these conclusions
may be different
• Trade liberalization seems to have
improved labor conditions for women, but
there is more evidence for employment
than wages
Sum Up continued
• Structural adjustment programs should be
mindful of the need to provide social safety
nets, and to choose an appropriate pace
of fiscal adjustment
Further Study
• Research at the macroeconomic level of
gender differences in behavior and their
implications
• Measuring and quantifying the
simultaneous relation between growth and
gender inequality
• Examining more systematically the
gender-disaggregated effects of structural
adjustment programs and fiscal policies
Implications for International
Financial Institutions
• Guidance to fiscal, monetary, and
structural reform
• Removal of arbitrary discrimination against
women in legislation where we provide
technical assistance, such as tax and
financial sector