Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey: Boosting Women's Status May Help Growth
January 29, 2007
A recent IMF Working Paper examined how differences in economic choices between men and women may lead to different outcomes for the macroeconomy.
Women work on a packing line at a Russian ice cream plant. (Photo: Vladimir Zinin/ITAR/TARS)
EQUALITY GENDER
The research has implications for desirable fiscal and monetary policies. Gender-based differences in economic behavior have long been integrated into models of economic development and in the fields of labor economics and public finance. However, in the past two decades, researchers have studied the macroeconomic implications of gender-based differences. The United Nations' Millennium Development Goals have explicitly linked economic progress to the equalization of opportunities for women. These goals thus recognize the importance not only of raising the status of women, but also of narrowing disparities between women and men. These gender disparities are often greatest in the poorest countries.
Highlights
The issue: What are the implications of gender differences in economic behavior for macroeconomic policy?
The bottom line: Reducing gender inequality and improving the status of women may contribute to higher rates of economic growth and greater macroeconomic stability.
Outcome: Macroeconomic policies should take into account the benefits of reducing gender inequalities, especially in the lowest-income countries, where these differences are most pronounced.
IMF economist Janet Stotsky explored the impact of gender in macroeconomic policy. She found the following:
• Gender-based differences in behavior that are systematic and widespread can influence macroeconomic variables, such as aggregate consumption, savings, investment, and risk-taking behavior. These differences may also influence public choice and the scope of government, which have macroeconomic repercussions.
• Gender influences consumption behavior in part through differences in behavior within the household. Women tend to devote a larger share of household resources to meeting the household's basic requirements and to fostering their children's potential.
• Gender influences savings and investment and risk-
taking behavior. Women tend to have a higher propensity to save and to invest in productive ways. They also show greater caution in their savings and investment behavior, which may often be good for poor households, though it can have mixed effects in the aggregate.
• Women's political empowerment may lead to a greater demand for public forms of social insurance and may also lead to a larger overall role for government.
• Women's lack of education, health care, and economic and social opportunities—both absolutely and relative to men—inhibits economic growth; at the same time, economic growth reduces women's subordinated condition. In countries with the lowest average income and where agriculture remains the main source of economic activity, women's lack of education, health care, and employment opportunities prevents them from being able to benefit fully from improved macroeconomic environments, hindering economic growth.
• One component of this relationship is that the growth of export-oriented industries in many developing countries, supported by trade and financial liberalization, has stimulated economic growth and created more jobs for women. This has generally established a beneficial relationship between export orientation, improved opportunities for women, and strengthened growth.
Fewer opportunities
One of the motivating forces behind research on gender differences has been the interest in ensuring that the benefits of economic growth are equitably shared. Women remain disadvantaged, especially in the developing world, where opportunities for educational, social, and economic advancement are usually markedly inferior to those of men. The result is a lower level of educational attainment, a higher rate of infant mortality for girls than boys in many countries, and relative life expectancies that do not accord with biological norms—the so-called missing women phenomenon.
Women also face discrimination in labor markets through a lack of job opportunities and sizable gender wage gaps, and in financial markets through limited access to credit or an inability to retain control over their own property, restricting their opportunities to improve their standard of living and have autonomy in their own lives. The disadvantaged status of women is equally evident in their relative lack of opportunities to participate in public decision making.
Evidence of the relationship between women's inferior status and growth is not fully conclusive—and even measurement of the degree of inequality or disadvantage in relation to men is a complex topic. But it does suggest that societies that increase women's access to education, health care, employment, and credit, and that narrow differences between men and women in economic opportunities increase the pace of economic development and reduce poverty.
Setting budgets that narrow gender inequalities
In a related working paper (WP/06/232), Stotsky examines "gender budgeting," which refers to the systematic examination of budget programs and policies for their impact on women. Australia was the first country to formally incorporate gender budgeting into its budget process by developing the concept of a "women's budget" to address inequalities between women and men. Government ministries and departments were required to provide an analysis of the impact of the annual budget on women and girls, focusing mainly but not exclusively on public expenditures.
In recent years, a range of countries have undertaken gender budgeting initiatives. In some countries of the European Union, for example, these initiatives are thriving, and analyses of the impact of budgets on women and reducing gender disparities have become an accepted part of the budgetary process. Gender budgeting initiatives have also been tried in a wide range of developing countries, from South Africa to the Philippines, where their success has been more mixed.
The motivation for gender budgeting stems from the observation that women remain disadvantaged relative to men in key economic, social, and political indicators. But in many areas, such as education, the differences are narrowing. Originally, gender budgeting initiatives emphasized ensuring the adequacy and proper targeting of spending for programs to reduce gender inequalities and improve the status of women. More recent initiatives are also focusing on the revenue side of the budget. Gender budgeting is sometimes seen as outside mainstream budgeting. However, this study shows that it fits squarely within that mainstream.
Gender differences in behavior also influence how we assess the impact of exchange rate changes (sometimes accompanying IMF- or World Bank-supported adjustment programs) and trade and financial liberalization on product and labor markets. In some countries, mainly those still based primarily on subsistence agriculture, inequalities in women's opportunities limit their ability to take advantage of beneficial macroeconomic and structural policies. This is a particular problem highlighted in research on sub-Saharan Africa, where women are limited mainly to subsistence agriculture. Exchange rate depreciation, geared toward restoring external balance, can impose a harsher adjustment burden on women than on men. When women have broader opportunities, including in export-oriented industries, the adjustment burden may weigh less heavily.
Adjusting IMF programs
Stotsky notes that her study was motivated initially by scholarly critiques of IMF- and World Bank-supported structural adjustment programs looking mainly at the experience of the 1980s and early 1990s. The critiques, which argued that these programs were excessively harsh toward women, tended to focus on the short-term effects of economic austerity, characterized by cutbacks in public spending or increases in fees for public services. Such measures had a direct effect on women but also an indirect effect by raising the amount of unpaid work women had to put in for their families. These critiques often did not account for the medium- or longer-term effect of these programs, which may be more beneficial overall.
Changes in the past decade in the design of IMF and World Bank structural adjustment programs have given greater emphasis to social concerns during the adjustment process. Some recent studies, including those undertaken by staff at the two institutions, show that structural adjustment programs are contributing to a narrowing of differences in education, health care, and employment between men and women. These considerations emphasize that policymakers need to recognize the importance of gender gaps and gender-based differences in behavior in choosing a mix of fiscal and monetary policies that will lead to the greatest success in economic adjustment.
One important implication of the studies is that it is essential to ensure that austerity measures, which may be necessary to stabilize the macroeconomy and reestablish the conditions for sustained growth, do not impose an excessive burden on women or female-headed households. Moreover, efforts must be made to mitigate the harshest effects of economic volatility through well-designed social safety nets and an appropriate pace of fiscal adjustment to ensure that the medium- and longer-term benefits are equitably shared and strengthened through sustained efforts to ensure equal opportunities in economic markets.