Fiscal Policies For Women’s Economic Empowerment

IMF Blog, February 18, 2020

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Making sure that opportunities to enter the workforce are fair and rewarding for women benefits everyone.
The average female workforce participation rate across countries is still 20 percentage points lower than the male rate.
Fiscal policy choices that address gender equality—such as investing in education or infrastructure, developing better sanitation facilities, implementing individual-based tax regimes, and offering parental leave—create more economic opportunities for women, increase growth, and reduce poverty and inequality.
Most measures pay for themselves in the long run without additional costs for governments; a larger workforce leads to higher economic activity and growth, which generate additional tax revenue.

Since the mid-1980s, at least 80 countries across all levels of development and regions have adopted fiscal policies to promote gender equality.
Previous IMF research suggests that in advanced economies, when governments actively promote policies to increase female labor force participation, more women join the labor force.
Country examples:
- Canada, Czech Republic, and Sweden increased women’s paid work when switching from family to individual income taxation.
For low-income and developing countries:
- Programs aimed at reducing gender gaps in education, particularly for secondary and university education, have supported more economic opportunities for women.
- Better infrastructure decreases the time spent on unpaid care work and provides more women the choice to enter paid employment.
Greater gender parity across occupational levels can foster new ideas and higher productivity.

Policymakers face limited budget room and competing demands: investing in schools or roads, introducing new revenue measures, or offering free, high-quality childcare.
Decisions should consider effects on economic growth and how policies reduce income and gender inequality.
Examples of measured impacts:
- Closing the gender gap in literacy rates in low-income countries: average literacy rate of men is about 70 percent while it is only 54 percent for women—closing this gap increases women’s productivity and equips more women for jobs in skill-intensive sectors.
- Labor-saving infrastructure: in Malawi, women on average spend 54 minutes a day collecting water; better access to infrastructure can free time and enable paid work.
- Tax structure: removing tax distortions for the lower-earning family member (usually the woman) by shifting from family to individual taxation creates incentives for more women to work and increases workforce diversity.

Not all gender-responsive fiscal policies benefit women equally; some measures have larger effects on poorer women.
- Subsidizing childcare and providing paid maternity leave have greater impact on poorer women who face higher childcare costs relative to income.
- In the US, poorer women spend 17.4 percent of their income on childcare compared to 7.8 percent for richer women.
Time horizons matter:
- Long-term measures: investing in education to equip girls with the same skills as boys boosts women’s human capital and future labor productivity.
- Short- to medium-term measures: cash transfers targeting poorer working women can help reduce poverty and inequality now.
Tackling gender-biased social norms amplifies the positive effects of gender-responsive measures and improves human rights and women’s economic empowerment.
- According to the Organization for Economic Co-operation and Development:
- Discriminatory laws and social practices reduce women’s years of schooling by 16 percent.
- They decrease labor force participation by 12 percent.
- They result in a global income loss of 7.5 percent of the global GDP.
Progress examples:
- Under the Promundo initiative, 34 countries have introduced programs to engage men and boys on gender norms with participants responding very positively.

Fiscal policies that promote gender equality can:
- Increase female labor force participation.
- Raise growth, reduce poverty, and lower inequality.
- Often pay for themselves over time through higher economic activity and tax revenue.
Policy design should consider distributional impacts, time horizons, and the role of social norms to maximize effectiveness.
Coordinated efforts by policymakers and citizens can foster equality, equity, and brighter prospects for all.

Source: Fiscal Policies For Women’s Economic Empowerment, Stefania Fabrizio, Daniel Gurara, Lisa Kolovich, February 18, 2020

Family Taxation and the Female Labor Supply: Evidence from the Czech Republic
- Family Taxation and the Female Labor Supply: Evidence from the Czech Republic (Markdown version)
- Family Taxation and the Female Labor Supply: Evidence from the Czech Republic (PDF)
Staff Discussion Note
- Staff Discussion Note (Markdown version)
- Staff Discussion Note (PDF)