Women in the Economy

Women in the Economy

By: Emily Kaput

 
“In a world in search of growth, women will find it, if they face a level playing field.” 
–Ms. Christine Lagarde, February 2015[i]

Today, 90% of countries in the world have legal regulations that inhibit female participation in the labor force. These regulations include laws that restrict female participation in specific professions, their ability to obtain a loan, and needing consent from their father or spouse to perform paid labor. An obstacle is the right to property (inherited or bought). Restricting female participation in the economy is popularly believed to decrease country’s ability to realize its full economic potential- this sentiment echoes in the halls of the United Nations, the International Monetary Fund, development banks around the world and by governments themselves.

This brings me to my research question: Do higher levels of women’s participation in the labor force inherently yield higher productivity? If not, what conditions, specific to the female population, contribute to higher productivity in economies?

The variable I chose to represent growth/size of an economy is Gross Domestic Product Per Capita.[ii] GDP would not be a properly scaled response variable as I am examining individual level contributions (female population) to growth in an economy.

The graph below displays the bivariate relationship between Female Labor Force Participation Rate and GDP Per Capita. My expectations: with higher levels of female labor force participation, GDP Per Capita would increase. This is not true in this bivariate representation.  There is a LOT going on in this graph. Certainly, where there is mid-range labor force participation by females, there is the highest GDP Per Capita. However, at the tail ends of this distribution GDP Per Capita is almost perfectly mirrored. Because this bivariate relationship does not tell me as much as I would have liked about female participation in the economy, I introduce control variables. These are: GDP attributed to Trade, GDP attributed to Agriculture, and Women’s Economic Rights.

I felt that measuring a country’s “openness” to trade was an important factor to include in this analysis.[iii] It is a popular notion that countries who actively participate in global trade are more likely to be liberaliz(ed/ing) societies.[iv] In addition to this, it is important to measure openness of an economy because international trade balance is an element of GDP. On the other hand, agrarian societies have historically been associated with traditional, conservative gender norms, and since the era of Western industrialization agrarian societies have been popularly known to have lower GDP.[v] Since GDP does not measure domestic activity (household productivity) these agrarian societies have a particular disadvantage when comparing their GDP with other less-agrarian countries.[vi]  *See appendix for graph of this bivariate relationship- congruent with expectations. 
Below, I have displayed the bivariate relationship between Women’s Economic Rights and GDP Per Capita. Note: with each score increase, GDP Per Capita increases.[vii]

In Table 1, I regress GDP Per Capita on these control variables and my key independent variable. The first two columns are my conditional models and the last column is my final, complete model with all variables.

Model 1: There was no significant relationship between Female Labor Force Participation Rate and GDP Per Capita. *The estimate displayed is likely a bad representation of the relationship, thank god.

Model 2: Guaranteed economic rights (only those countries who scored 3) have a positive effect on GDP Per Capita, as does increasing amounts of trade as a percent of GDP. The expected negative relationship between GDP Per Capita and agriculturally dominant societies is evident; there is a statistically significant decrease in GDP Per Capita per one percent increase in GDP attributed to agriculture.

Model 3: Here, where GDP is regressed on all variables, a clearer story is told. Female Labor Force Participation Rate has no relationship with GDP Per Capita- completely throwing out my initial assumption of a positive conditional relationship. Where women have guaranteed economic rights, however, there is a significant positive relationship. *Recall the exponential increase of GDP Per Capita in the bar graph displaying Women’s Economic Rights and GDP Per Capita. With every percent increase in Trade, GDP Per Capita increases by $66.57. And, unsurprisingly, GDP Per Capita decreases by $499.92 per one percent increase of agriculture’s share in GDP. Noting the R-Squared value: This model can only explain approximately 57% of the variation in this model. Meaning that there are other variables not included in this model, which would help to explain variance in GDP Per Capita around the world.

What does it mean, that female labor force participation has no effect on GDP Per Capita? Simple: other factors are necessary to include when exploring female contributions to growth in economies.  For instance, Women’s Economic Rights is a great place to start when explaining women’s role in the economy. In societies where women hare more economic rights, GDP Per Capita is higher than where there are little to no economic rights for women. Regardless of the Female Labor Force Participation Rate, economies seem to be more productive and citizens are ‘better off” when women are guaranteed economic rights.

However, this does not imply causality. According to a report given by the World Bank,[viii] increases in women’s economic rights tend to be the result of economic growth. Middle-and-low-income countries have the same level of restraints on women’s economic rights, and several papers explore this relationship between growth in an economy and its effect on women’s economic rights. A post about this relationship would be a great follow-up for this post.

Note from the author: My examination of women and growth in economies around the world succeeded only in raising more questions, which is preferable (in my opinion). In fact, I am relieved! The relationship between women and the economy had better NOT be explained by so few variables!

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[i] Lagarde, Christine. "Fair Play—Equal Laws for Equal Working Opportunity for Women." Web log post. IMFdirect. International Monetary Fund, 23 Feb. 2015. Web. <http://blog-imfdirect.imf.org/2015/02/23/fair-play-equal-laws-for-equal-working-opportunity-for-women/>.

[ii] United Nations, United Nations Statistics Division, National Accounts Estimates of Main Aggregates (2010), Per Capita GDP- USD.  GDP Per Capita is negatively skewed, meaning that there are several observations that are abnormal (distribution is NOT normal). These outliers are: Monaco, Luxembourg and Norway (GDP Per Capita higher than the mean, $70,000.00). I chose not to “fix” this variable because there were only a handful of outliers, and the “fix” only reflected the data and created a positively skewed distribution. On the whole, I believe GDP Per Capita data to be an adequate representation of global GDP Per Capita.

[iii] Alexander C. Chandra, Lucky A. Lontoh, And Ani Margawati. "Beyond Barriers: The Gender Implications of Trade Liberalization in Southeast Asia." Trade Knowledge Network (2010): n. pag. International Institute for Sustainable Development. Web.

[iv] World Bank, World Development Indicators, Trade, Value Added (% of GDP) (2010).

[v]World Bank, World Development Indicators,  Agriculture, value added (% of GDP) (2010).

[vi] "News." Economic Development = Equal Rights for Women? World Bank, 24 Sept. 2013. Web. 17 Mar. 2015. <http://www.worldbank.org/en/news/feature/2013/09/24/Economic-Development-Equal-Rights-for-Women>.

[vii] Teorell, Jan, Stefan Dahlberg, Sören Holmberg, Bo Rothstein, Felix Hartmann & Richard Svensson. 2015. The Quality of Government Standard Dataset, version Jan15. University of Gothenburg: The Quality of Government Institute, http://www.qog.pol.gu.se. ciri_wecon, 2010, Panel Data.

[viii] Hallward-Driemeier, Mary; Hasan, Tazeen; Rusu, Anca Bogdana. 2013. Women's legal rights over 50 years : progress, stagnation or regression ?. Policy Research working paper ; no. WPS 6616. Washington, DC : World Bank Group. http://documents.worldbank.org/curated/en/2013/09/18287629/women’s-legal-rights-over-50-years-progress-stagnation-or-regression

Appendix: