1. Gender and Its Relevance to Macroeconomic Policy: A Survey
Janet G. Stotsky
International Monetary Fund

2. Purpose of Study
Assess the relevance of gender differences for macroeconomic policy
Gender differences have long been incorporated into models in development, public finance, and labor economics
Gender differences in a macro context have been examined more recently

3. Issues
Differences in aggregate consumption, investment, and risk taking behavior and in preferences for public sector role
Relationship between women’s economic status and economic growth
Labor market, trade, and financial market developments
IMF and World Bank programs

4. Gender Differences in Behavior and Macroeconomic Outcomes
Gender differences in behavior may influence key macroeconomic outcomes
The analytical underpinnings in microeconomic theory
Household production where time is an important input
Human capital is an important product of the household
Multiple decision makers within the household, thus household members may respond differently to the economic environment and economic policies may affect household members differently

5. Consumption Behavior
Private consumption is the largest component of aggregate demand; thus understanding consumption is key
Permanent income, life cycle model
Consumption behavior via savings and investment is linked to external stability

6. Consumption behavior evidence
Two strands of evidence:
Women have a stronger preference for spending on goods and services that contribute to human capital accumulation of their children and are household necessities
Evidence on this comes from many countries in the developing world

7. Consumption behavior evidence continued
Price and income elasticities differ though differences tend to narrow as income rises
Price elasticities of demand for education (both enrollment and years of schooling) are higher in absolute terms for females than males
Income elasticities also are higher for females than males
Two stage decision: decision to educate and then how much to spend, given the decision is made to educate

8. Implications of Consumption Behavior Differences
Raising the share of spending over which women have control benefits children and raises human capital
It also tends to stabilize spending by increasing the proportion spent on necessities
Price and income elasticity evidence suggests that relative price increases and income declines are more harmful to female access to education and health care

9. Savings and Investment Behavior
Theories of saving include smoothing consumption, bequest and investment motives, precautionary purposes
Savings behavior may reflect a greater degree of uncertainty and a lack of access to formal markets
Women may have greater incentive to save because of their role as home builders, greater life expectancy, and stronger bequest motives
Differential access to financial markets may also influence
Empirical work suggests that as women have greater earnings capacity relative to men, savings increases but evidence is scant

10. Risk Preferences
A number of studies have also examined risk preferences, mainly using developed countries owing to absence of data elsewhere
Women tend to be more risk averse
Risk pooling may also differ and evidence from developing countries
Micro credit evidence suggests women have superior repayment record and use loans more productively

11. Public Choice
A number of studies have examined the impact of giving women the right to vote
Women’s suffrage has led to a greater growth of government and tendency toward greater “liberalism”
Women tend to support greater redistributive spending and public forms of insurance
The economic implications of a larger government role are ambiguous

12. Summing Up Gender Differences in Macroeconomic Behavior
Improving women’s control of household resources may lead to higher levels of human capital spending, more stable consumption behavior, greater investment, and lower risk taking
Increasing women’s political influence may lead to a greater role for redistributive fiscal policies and public insurance
Upshot: more growth and lower risk, though some ambiguities remain

13. Gender Inequalities and Growth: A Simultaneous Relationship
Neoclassical growth theory relates economic growth to capital accumulation
Endogenous growth models allow for a larger set of variables and do not require production to have diminishing returns in inputs
Human capital is an important contributor to higher growth

14. Gender Considerations in Growth Models
Endogenous growth models can incorporate gender considerations through time as an input, education, and human capital accumulation
Evidence suggests that reducing gender inequality leads to higher growth and higher growth leads to reduced gender inequality

15. Gender Inequalities in Education, Health, and Social Capital on Growth
A number of researchers have examined this relationship (Dollar and Gatti, 1999; Knowles et al, 2002; Klasen, 2002)
Generally the finding is that female education leads to higher growth
Inequality leads to an inability to take advantage of beneficial conditions and lower agricultural productivity (Blackden and Bhanu, 1999)
Education, health capital, and governance improve growth and gender equality leads to more education for females (Baldacci et al, 2004)

16. Effect of Economic Growth on Gender Inequalities
Forsythe et al (2000) use panel data to investigate how growth affects gender inequalities
They find a simultaneous relationship, though measurement varies with the specification
A number of UN indexes try to measure gender inequality and relate to level of income

17. Gender Inequalities in Labor and Financial Markets
Unpaid economy is significant
The omission of it in economic models hinders a full assessment of economic changes
The substitution of paid and unpaid labor
The opportunity cost of time
Economic adjustment has implications for time burdens in the household

18. Labor Markets and Export-Oriented Manufacturing
Globalization is changing the world’s economy
Trade liberalization is an important change and has led to the growth of export oriented manufacturing
A number of studies have examined the influence of trade liberalization on the labor market roles of women
The conclusions are that it has has led to greater job growth but ambiguous effects on relative wages

19. Aid Inflows and Macroeconomic Changes
Aid inflows can have differential effects by gender
Aid inflows can put upward pressure on exchange rates
This might be helpful to women trapped in subsistence economy but harmful to those who can benefit from export oriented trade

20. Capital Markets and Financial Liberalization
Financial liberalization is also changing the world’s economy
Financial liberalization is beneficial but can lead to greater instability
Women cannot always benefit if their access to financial markets is limited
Instability may have disproportionately harmful effects on women
Foreign direct investment may lead to more use of subcontractors, including home based with some benefits to women

21. Summing Up Gender Inequalities in Labor and Financial Markets
Removal of impediments to labor force participation is important
Exchange rate changes interact with labor market structures
Financial liberalization has ambiguous effects by increasing access but also increasing instability

22. Gender, Economic Instability, and Adjustment
Macroeconomic fluctuations are pervasive and may lead to fiscal and financial distress
Fiscal austerity is often a by-product of distress, especially to improve external sustainability by reducing domestic demand
Fiscal retrenchment can take different forms, on both revenue and spending side, with differential effects by gender

23. Fiscal Austerity and Gender
Higher fees for government services, especially for health and education, may disproportionately affect females
Tax changes are not gender neutral
Reduction in services may also have differential effects both directly and indirectly through time burdens

24. Labor Market Fluctuations
Labor market fluctuations affect men and women differently
In the U.S., men’s wages exhibit greater procyclicality
Developing country evidence is scarce on this issue
Public sector employment cuts may disproportionately affect women
But women’s private sector employment may be more resilient in a downturn

25. Structural Adjustment
IMF and World Bank structural adjustment has been criticized for being disproportionately harmful to women
The reasons include the fiscal austerity and labor market effects
Important to distinguish short and longer term effects of adjustment programs

26. Structural Adjustment and Exchange Rate Changes
Structural adjustment is often accompanied by exchange rate depreciation which affects the relative profitability of export industries
Where women are mainly limited to subsistence activities, depreciation may be harmful in that they cannot benefit from improved environments for export
If accompanied by fiscal austerity, this can be a double blow

27. Structural Adjustment and Gender
World Bank (2001) examined how gender equality evolved in countries undergoing structural adjustment in the 1980s and early 1990s. Focusing on Sub-Saharan Africa, it found programs did not have outcomes that differed significantly by gender
Another study (Forsythe et al, 2000) found something similar for IMF programs

28. Structural Adjustment and Education
Several studies have examined the effect of structural adjustment on education
Rose (1995) found a negative impact of World Bank programs on female education
Buchmann (1996) found the same for IMF programs

29. Poverty Reduction and Growth Facility
The PRGF was introduced in 1999
It is intended to increase the emphasis in low-income countries on pro-poor and pro-growth policies, fiscal flexibility, and better governance
A 2002 IMF review found that the composition of spending had evolved in pro-poor and pro-growth ways under early PRGF programs

30. Sum Up
Empowering women in the economy can enhance growth and provide stability
There may be less risk taking and greater role for government
Economic growth and gender inequality have a simultaneous relationship and the evidence suggests that growth leads to lower inequality and vice versa

31. Sum Up continued
In countries based on subsistence agriculture, women’s inequality may limit their ability to take full advantage of better macroeconomic and microeconomic conditions
Exchange rate depreciation is harmful to women limited to a subsistence economy

32. Sum Up continued
Where women have opportunities for export oriented industry, these conclusions may be different
Trade liberalization seems to have improved labor conditions for women, but there is more evidence for employment than wages

33. Sum Up continued
Structural adjustment programs should be mindful of the need to provide social safety nets, and to choose an appropriate pace of fiscal adjustment

34. Further Study
Research at the macroeconomic level of gender differences in behavior and their implications
Measuring and quantifying the simultaneous relation between growth and gender inequality
Examining more systematically the gender-disaggregated effects of structural adjustment programs and fiscal policies

35. Implications for International Financial Institutions
Guidance to fiscal, monetary, and structural reform
Removal of arbitrary discrimination against women in legislation where we provide technical assistance, such as tax and financial sector