Media Briefings

TACKLING GENDER INEQUALITY WILL BOOST ECONOMIC GROWTH

  • Published Date: April 2014

Removing the barriers to labour market participation that women face in many parts of the world will lead to substantial productivity gains, according to research by Marc Teignier, to be presented at the Royal Economic Society’s 2014 conference. His study, which examines the quantitative effects of gender gaps in entrepreneurship and labour force participation on aggregate productivity and income per capita, finds that:

 

When all women are excluded from entrepreneurship, average output per worker drops by almost 12% because the average talent of entrepreneurs falls.

 

If all women are excluded from the labour force, on the other hand, averageincome decreases by almost 40%.

 

Gender gaps and their implied income losses differ widely across geographical regions of the globe: the largest income loss – 27% – is in the Middle East and North; and the second largest in South Asia – 19%.

 

Sub-Saharan Africa is the region with the lowest total income loss due to gender gaps, 8.5%.

 

Europe is the region with the lowest labour participation gender gap, 15.1%, and the second lowest total income loss, 10.4%.

 

Marc Teignier comments:

 

‘When people are free to choose their occupation, the most talented individuals – independently of their gender – will often organise production carried out by others, and so they will spread their ability advantage over a large scale.

 

From this point of view, obstacles to women's access to entrepreneurship reduce the average ability of a country's entrepreneurs and negatively affect the way production is organised in the economy and, hence, its aggregate efficiency.

 

More…

 

This study examines the quantitative effects of gender gaps in entrepreneurship and labour force participation on aggregate productivity and income per capita. The resultsshow that when all women are excluded from entrepreneurship, average output per worker drops by almost 12% because the average talent of entrepreneurs falls.

 

If on the other hand, all women are excluded from the labour force, income per capita is reduced by almost 40%. Actual gender gaps and their implied income losses differ importantly across geographical regions around the globe, with a total income loss of 27% in Middle East and North Africa and a 10% loss in Europe.

 

The World Bank’s 2012 World Development Report (2012) describes in detail the current state of gender inequality across the world. Recent decades have witnessed a significant drop in gender gaps in the labour market but the prevalence of some of these gaps is still high, especially in developing countries. In particular, the data show that women still fall behind in earnings and productivity.

 

One possible explanation is that women tend to be underrepresented in high-skilled occupations and entrepreneurship. When people are free to choose their occupation,the most talented individuals – independently of their gender – will often organise production carried out by others, and so they will spread their ability advantage over a large scale. From this point of view, obstacles to women's access to entrepreneurship reduce the average ability of a country's entrepreneurs and negatively affect the way production is organised in the economy and, hence, its aggregate efficiency.

 

To do the analysis, the study proposes a model in which agents differ in their entrepreneurial ability and, based on this, they choose to be workers, self-employed or employers. Men and women have the same talent distribution, but there are several frictions on women's opportunities and pay in the labour market.

 

In particular, the analysis restricts the fraction of women participating in the labourmarket as well as the number of women who can work as employers or as self-employed and, finally, women who become workers receive a lower wage. The research then chooses the parameter values of the model to match some data facts on firms’ size distribution and occupational choices and simulate it to obtain the quantitative predictions.

 

The cross-country analysis documents the existence of remarkable differences in gender gaps across geographical regions, which lead to significant variation in implied income losses. The region with the largest income loss is the Middle East and North Africa where the total income loss is 27%, of which 6.9% can be attributed to losses associated with occupational choice gaps.

 

South Asia has the second largest income losses due to gender gaps, 19.2%, a fourth of which is due to occupational gaps. Sub-Saharan Africa, on the other hand, is the region with the lowest total income loss due to gender gaps, 8.5%, while Europe is the region with the lowest labour participation gender gap, 15.1%, and the second lowest total income loss, 10.4%.

 

Although the observed gender gaps cannot be directly associated with discrimination,these results suggest that removing the barriers that women face in the labour market is likely to lead to substantial productivity gains.

 

ENDS

 

 

Notes for editors:

‘Aggregate Costs of Gender Gaps in the Labour Market: A Quantitative Estimate’ by Marc Teignier

 

For further information, contact:

Marc Teignier, +34 69 66 01 125marc.teignier@ub.edu