Macroeconomic Impacts of Gender Inequality and Informality in India
IMF Working Papers, February 9, 2016
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- Macroeconomic Impacts of Gender Inequality and Informality in India
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Bibliographic details
- Authors: Purva Khera
- Published: February 9, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475590784.001
Summary
- Paper examines the macroeconomic interaction between informality and gender inequality in the labor market.
- Develops a dynamic stochastic general equilibrium (DSGE) model to study impacts of gender-targeted policies on:
- female labor force participation,
- female formal employment,
- gender wage gap,
- aggregate economic outcomes.
- Model is estimated using Bayesian techniques and Indian data.
- Main high-level result: gender-targeted policies increase female labor force participation and output, but without sufficient formal job creation due to labor market rigidities they lead to increases in unemployment and informality and further widen gender gaps in formal employment and wages.
- Simultaneous implementation of gender-targeted policies with formal job-creating policies removes adverse impacts and yields significantly larger gains in output.
Model, Methods, and Keywords
- Model type: dynamic stochastic general equilibrium model.
- Estimation approach: Bayesian techniques.
- Keywords and topics explicitly listed:
- Bayesian estimation, DSGE model, gender inequality, gender wage gap, Global, income effect, Indian economy, informality, labor market, Labor markets, Labor supply, open economy, production function, South Asia, substitution effect, wage income, Women, WP
Findings and Mechanisms
- Gender-targeted policies:
- Raise female labor force participation.
- Raise output.
- Labor market rigidities and insufficient formal job creation:
- Lead to increased unemployment.
- Increase informality.
- Further widen gender gaps in formal employment.
- Further widen gender wage gaps.
- Policy interaction:
- Combining gender-targeted policies with formal job-creating policies:
- Removes the adverse impacts (increased unemployment and informality).
- Leads to significantly larger gains in output.
Policy Implications
- Gender-targeted policies alone are insufficient when formal job creation is constrained by labor market rigidities.
- Policy packages combining gender-targeted interventions with measures that promote formal job creation are necessary to:
- Prevent increases in unemployment and informality,
- Reduce gender gaps in formal employment and wages,
- Achieve larger gains in aggregate output.