What role can gender play in understanding income growth, poverty and inequality? This working paper, published by the International Policy Centre for Inclusive Growth, argues that gender equality is critical in any attempt to reduce poverty. In particular, it finds that increasing women’s access to the labour market correlates very positively with greater economic equality overall. The analysis draws on microsimulations performed for eight Latin American countries, covering four areas of gender inequality: labour market participation, occupational status, wage discrimination and characteristic endowments.
Researchers have previously scrutinised the connection between gender issues and economic growth from a macroeconomic perspective, especially through cross-country regression analyses. The papers authored by Dollar and Gatti (1999), Klasen (2002) and Klasen and Lamanna (2003) all look at the ways in which gender gaps in education and employment impact economic growth. Although details vary, they have typically found a negative correlation. A micro approach, on the other hand, can lay out a comprehensive context for understanding how gender inequality is linked to the growth of household income and levels of poverty and inequality. The decomposition methodology developed by Bourguignon et al. (2001) for these microsimulations has previously been used for the analysis of wage differentials, including the gender wage gap. In this case, counterfactual household income distributions are compared to the original to estimate the impact of each simulation.
The following conclusions emerge from these microsimulations undertaken for eight Latin American countries, with the caveat that these are partial equilibrium results, and thus rough estimates:
- Gender inequalities matter not only for women, but for the entire society, especially the poor. Eradicating gender inequalities would drive an upswing in household income and reduce both poverty and inequality.
- Results are likely to vary by country and by the aspect of gender inequality under analysis. For example, the microsimulation for El Salvador, where women are less likely to be unemployed than men, showed that equalisation of occupational status would actually increase poverty.
- Achieving parity in terms of characteristic endowments for men and women, such as education level, did not bring about significant results in the countries analysed.
- Equalising the probability of men and women occupying each occupational status did bring about poverty reduction and increased income, except in El Salvador. However, the scale of this change would generally not be as dramatic as that resulting from the elimination of gender wage discrimination.
- The most notable results from this study concern the simulation in which men and women have an equal probability of being economically active. Boosting female labour participation led to significant results in terms of poverty and inequality declines and income growth.
A number of policy implications are suggested by the microsimulations:
- Promoting female participation in the labour force should be a particular focus of public policy in the countries studied.
- Although some studies have shown how a larger female labour force led to increased inequality in Brazil and Taiwan, a likely explanation is that these women were from the upper part of the income distribution.
- It is vital to guarantee that women can become economically active and gain access to the labour force -these are prerequisites for bringing about an increase in the female labour force generally.
- Given that children affect women’s ability to become economically active, governments should consider providing childcare facilities, especially to poor women.