Globalization (Trade) and the Wellbeing of (Poor) Women

and Children

Maurizio Bussolo

Gender Inequality and Globalization: Recent Evidence and Debates November 30, 2011

12:30 - 2:00pm - MC2-800

Sponsored by PREM Gender Anchor (World Bank)

Key Question and ControversiesWhat is the impact of trade shocks on the well-being of

(poor) women and children?

R. Kanbur (2001): “Trade, openness and poverty/inequality are the archetypal, emblematic areas around which there are deep divisions, and where certainly the rhetoric is fiercest”

Three broad areas of disagreement:

Level of aggregationTime horizonMarket structure and power

Theory and Empirical AnalysisTo answer our key question, one needs to understand how

macroeconomic shocks are linked to microeconomic consequences

1st stage: macro shock and its effects on factor markets• What is the impact of trade liberalization on factor incomes of men

and women

2nd stage: poverty depends on how factor incomes are turned into individual consumption by the sharing of factor incomes between members of the household

• Tax and public expenditures• Sharing within the household (patterns of household formation and

intrahousehold allocations)

Feedback loops stage: macro-level changes alter the micro-level intrahousehold allocation processes which, in turn…

1st Stage - Trade and gender gap: earnings

Standard models (Ricardo, HOS) say…

Discrimination and competition (through increased imports) [Becker (1971)]. But increased competition reduces the bargaining power of wage workers.

Empirical findings are mixed.

1st Stage - Trade and gender gap: employment opportunities

Women’s lab. participation has risen in most countries in recent decades

But isolating the effect of trade expansion from other effects can be difficult.

A robust finding: the type of exportable sector that expands matters a lot

feminization of employment through export-orientation: manufacturing>agriculture; services (?)

Possible explanation: women tend to have weaker property rights over land and complementary factors needed for agriculture production.

Additional finding: women tend to be confined to female jobs.

2nd and Feedback Stages: Trade and intrahousehold dynamics

Trade liberalization (via its effects on gender gaps) is likely to influence the allocation of time and resources among household members;

Changes of women bargaining power and long term growth and poverty effects:

An increase of women’s income has normally a beneficial effect on household calorie consumption and on education expenditures.

Fewer studies consider these effects due to limited availability of relevant micro data

Growth

Trade

Poverty

Gender inequalityDistribution

Main MessagesWhat is the impact of trade liberalization on the well-

being of women and children?

Some messages from research are very clear:

Trade expansion may exacerbate gender disparities in agricultural-based, African economies but may reduce it in manufacturing-based economies (like Honduras)

For a constant rate of growth, a deterioration in household income distribution triggered by widening gender disparities results in lower poverty reduction

Through their effect on human capital investment at the household level, gender disparities may also lower long term growth ( lower potential for long term poverty alleviation)

Main MessagesHowever:

Even if trade liberalization brings gender effects, these tend to be of a small and sometimes uncertain sign;

Thus when trade liberalization exacerbates gender disparities, the positive (aggregate) income effects dominate;

In policy relevant terms

trade liberalization should not be halted because of concerns over potential negative effects on women, overall income growth effects over-compensate;

This does not mean that trade-related gender inequality effects should be ignored (government interventions needed)

Two case studies

The role played by gender in shaping the links between trade and poverty can be illustrated by considering the stories of two women.

Consuelo in San Pedro Sula

Consuelo in San Pedro Sula 34 years old Married 2 children Almost finished primary school (5

years of schooling) Wage worker in the formal sector Earns 1,150 LP per month (1995

prices) HH per capita income of 655 LP This is not enough to reach the

poverty line of 675 LP per month

Aminata in Diourbel

Aminata in Diourbel 33 years old Married 4 children Slightly more than 2 years of schooling Agricultural self-employed (basically

millet) Earns 19,160 CFA francs per month

(1995 prices) HH per capita income of 8,340 CFA

francs Not enough to reach the poverty line

of 8,500 CFA francs

Consuelo and Aminata live in two different contexts (1995)

Aminata: Senegal

Honduras (1995) Senegal (1995)

Urbanization Rate 43% 61%

Poverty Rate 55% 67%

Comparative Advantage Maquila Groundnuts

In the mid 1990s, their respective governments opted for export-led growth

strategies

How is this MACRO decision affecting the lives of Consuelo and Aminata?

Consuelo faces new

opportunities

Finds a job in the manufacturing sector Her salary increases by 31% This is enough to pull the household out of poverty! The difference between Consuelo’s and her husband

wage reduces 16%, which means that she feels more empowered within her household

Aminata loses

bargaining power

Since Aminata’s husband is a groundnut producer, the household has a higher income

However, Aminata’s husband controls all the cash from trading groundnuts, creating two negative effects:

Deters Aminata from helping her husband in the production of groundnuts

Adverse change in consumption patterns

0

10

20

30

40

50

60

Primary Industry Const. andTrans.

Commerce Services

Share of GDP Share of Employment

A Summary of our micro resultsTrade-related Shock

Manufactures (LAC) Agriculture (SSA)

Differences in Comparative Advantage

Increase in Demand forFemale workers

Increase in exports of cash cropsUsually controlled by men

Gender wage gap ↓ HH Income↑

Poverty ↓

Gender income gap ↑

Lower supply response

Poverty ↓

Lower investmentIn Human Kap

Long term adverse effect

HH Income↑

Concluding remarks

An important caveat: the above results have not taken into account the feedback loop (from micro to macro – family formation, household structure);

In a sense they take the social norms and preference as static; but these change

There is a complex dynamic interplay between gender inequality and development;

This dynamic interplay is emphasized by WDR 2012 and LAC chief economist report (education, health, access; U shaped relations)

Concluding remarksRelationship between Female Labor Force Participation and GDP per capita

Household Size and Age of Household Head by Income Group

Concluding remarks