Economic Gains From Gender Inclusion: New Mechanisms, New Evidence

Staff Discussion Notes, October 8, 2018

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Canonical URL: Economic Gains From Gender Inclusion: New Mechanisms, New Evidence

Authors: Jonathan David Ostry, Jorge A Alvarez, Raphael A Espinoza, Chris Papageorgiou
Published: October 8, 2018
Series: Staff Discussion Notes
DOI: https://doi.org/10.5089/9781484337127.006

While progress has been made in increasing female labor force participation (FLFP) in the last 20 years, large gaps remain.
Improving gender diversity can result in larger economic gains than previously thought.
Gender diversity brings benefits over and above the benefit from simply increasing the number of (male) workers because women bring new skills to the workplace.
Male and female labor are imperfect substitutes in production; therefore gender differences in the labor force matter.
Standard models that ignore gender differences understate the favorable impact of gender inclusion on growth and misattribute to technology part of growth that is actually caused by women’s participation.
Narrowing gender gaps benefits both men and women, including a boost to male wages from higher FLFP.
Sectoral reallocation from traditional agriculture to services—which typically has relatively high FLFP—supports both gender parity and productivity gains along development paths.

Diversity effects: Women introduce distinct skills and behavioral traits that can affect productivity; these may reflect social norms, upbringing, social interactions, risk preferences, and responses to incentives.
Imperfect substitution in production: Male and female labor are not perfect substitutes, implying that composition matters for aggregate production.
Sectoral reallocation channel: Movement of labor from agriculture to services raises overall FLFP because services have relatively higher FLFP, thereby contributing to productivity and growth.

Growth accounting: Part of measured growth often attributed to technology may instead reflect rising women’s participation; failing to account for gender composition biases growth decompositions.
Distributional effects: Higher FLFP can raise male wages as well as female outcomes, indicating economy-wide gains from narrowing gender gaps.
Structural transformation: Development-driven increases in services employment can mechanically improve gender parity and aggregate productivity because FLFP is typically higher in services.

Policies that increase FLFP provide direct productivity benefits through diversity and composition effects, not merely by expanding labor supply.
Structural policies that facilitate sectoral reallocation toward services can amplify gender inclusion and productivity gains.
Labor-market and social policies should consider gender-specific constraints and differences in labor attributes to capture the full growth potential of gender inclusion.

Subjects: Employment, Gender, Gender diversity, Gender inequality, Labor, Women
Keywords: capital stock, Central Asia, comparative advantage, Employment, employment growth, female labor force participation, FLFP barrier, Gender diversity, Gender inequality, labor force, labor force participation, male-to-female employment ratio, Middle East, North Africa, production function, SDN, services employment share, South Asia, structural transformation, Sub-Saharan Africa, Women

Staff Discussion Note by Jonathan David Ostry, Jorge A Alvarez, Raphael A Espinoza, and Chris Papageorgiou (October 8, 2018).

sdn1806 — EXECUTIVE SUMMARY and Chapters on Gender Diversity and Barriers
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