Gender Equality Is Smart Development Economics

Issue NO. 23

By Otaviano Canuto*

Brazilian “conditional cash transfers” are small amounts of money distributed by the government directly to very poor households on condition that their children attend school and are vaccinated. Do you know why they go to the household women? Researches undertaken in the 1990s in the country – and later confirmed in others – showed babies with more height and weight when women had more bargaining power over household income! To say the least, this has obvious consequences in terms of health and labor capacity of the adult population, and therefore to economic growth.

Greater control over household resources by women can strengthen an economy where poverty predominates as spending patterns tend to be shaped in ways that benefit children. There is also strong evidence of how improvements in women’s education and health are associated with better outcomes for their children.

You may be surprised with the range of mechanisms through which lessening gender inequality can boost economic growth. Think of investments in infrastructure. Most analyses focus on several ways by which more and better infrastructure help lift growth by reducing waste of time and resources on production and transportation. What may have been less realized is its effect on growth in poor countries through… gender-asymmetric effects! More and better access to rural roads, water, power grids, and others may especially reduce mothers’ time allocated to household chores and raise time allocated to market work, human capital accumulation, and/or child rearing. The latter is also productive; it leads to improved health in both childhood and adulthood. Crucially, the increase in time devoted to human capital accumulation raises women’s bargaining power, which translates into a higher family preference for girls’ education and children’s health, an increase in the average share of family income spent on children, and a lower preference for current consumption.

Lower gender inequality in terms of bargaining power therefore brings long-term growth effects associated with intergenerational health transmission, health persistence, and access to infrastructure affecting women’s occupational choices.

There is also the productivity effect of reducing gender inequality of opportunities. This is the case when women’s skills and talents can be deployed without gender-specific constraints.

Some years ago, the World Bank called attention to estimates of labor productivity potentially rising by up to 25 percent in some developing countries if barriers discriminating against women working in certain sectors or occupations were written off. As an example, it pointed out that maize yields would rise by almost one-sixth in Malawi and Ghana if women farmers were to have the same access as men to fertilizers and other inputs.

A third dimension of gender equality having economic consequences can be found in the empowerment of women as economic, political, and social actors. An example approached in the same report by the World Bank comes from India, where giving power to women at the local level led to increases in the provision of public goods, such as water and sanitation, which mattered more to women.

Some dimensions of gender inequality in developing economies – like educational enrolment and labor force participation – have diminished along the last few decades. Formal rights and constitutional guarantees for women have advanced in some countries. However, the scope of opportunities to boost economic growth via policies oriented to lessening inequality remains wide.

Gender Equality Pays Off in Brazil

Take the example of Brazil. Progress in lessening gender inequality has happened in terms of lower illiteracy rates for women and shares of the female labor force with tertiary education even higher than males. Government policies – some of them implemented in cooperation with the private sector – have also been addressing needs of mothers, providing health care before and during pregnancy and at birth, and child care and education.

Notwithstanding these milestones, a lot remains to be done. For instance, gender gaps in access to formal employment and market income persist in Brazil. Even though there has been an increase in the share of women employed in the nonagricultural sector, their comparative advantage in education has not been reflected in relative market wages—despite the average higher skill level of the female labor force.

Pierre-Richard Agénor, from the University of Manchester, and I have illustrated the impacts of lowering gender inequality on raising Brazil’s economic growth, developing a macroeconomic model with which one can simulate results from specific policies. Suppose for instance that the government successfully implements antidiscrimination laws that lead to a full elimination of gender bias against women in the workplace. Using Brazil’s data, our model-based calculations suggest that an “equal work, equal pay” policy could add up to 0.2 percentage points to the country’s annual gross domestic product (GDP) growth rate. This is just the direct effect of increases in women’s “take-home” pay, not considering other effects on the allocation of talent and the production of human capital.

Again, using our model, we simulated the effects of a budget-neutral increase in government spending on infrastructure investment. Calculations suggest that an increase of 1 pp of GDP as a result of such policy could add between 0.5 and 0.9 percentage points to Brazil’s annual rate of output growth, once direct and indirect effects—most notably through changes in women’s time allocation and their bargaining power over family resources—are accounted for.

Gender inequality is a strong deterrent to prosperity. It must receive attention far beyond the annual International Women’s Day.

*Otaviano Canuto is an Executive Director of the World Bank and a Member of the OMFIF Advisory Council. The opinions expressed in this article are his own.