Economic liberalization, gender wage inequality and welfare – a theoretical analysis

Mukhopadhyay, Ujjaini and Chaudhuri, Sarbajit (2011): Economic liberalization, gender wage inequality and welfare – a theoretical analysis.

Abstract

The paper develops a 3-sector general equilibrium model appropriate for economies with female labour oriented export sector to examine the effects of economic liberalization policies on gender based wage inequality. It is assumed that there exist disparities in efficiencies between male and female labour due to skewed access to education and health, and differences in their spending patterns leading to differential effects of respective wages on their nutrition. The results indicate that tariff cut may reduce gender wage inequality, but may have detrimental effects on welfare; while foreign capital inflow may accentuate the inequality, despite improving the welfare of the economy. However, government policies to increase the provision of education and health have favourable effects on gender wage inequality but may be welfare deteriorating. Thus, the paper provides a theoretical explanation to empirical evidences of diverse effects of liberalization on gender wage inequality and explains the possibility of a trade-off between gender inequality and social welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: gender; wage inequality; foreign capital inflow; tariff cut
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; J - Labor and Demographic Economics > J1 - Demographic Economics > J16 - Economics of Gender ; Non-labor Discrimination

References

Altonji, J, F. Hayashi and L.J. Kotlikoff. 1992. Is the extended family altruistically Linked? Direct tests using micro data. American Economic Review 82(5): 1177-1198.

Anderson, S. and J.M. Baland. 2002. The economics of Roscas and intrahousehold resource allocation. The Quarterly Journal of Economics 117(3): 963-995.

Balakrishnan, R. 2002. The hidden assembly line: gender dynamics of subcontracted work in a global economy. Bloomfield, CT: Kumarian Press.

Becker, G.S. 1957. The economics of discrimination. Chicago: The University of Chicago Press.

Benería, Lourdes. 2003. Gender, development, and globalization: economics as if all people mattered. New York: Routledge.

Berik G., Y. Rodgers and J. Zveglich. 2004. International trade and gender wage discrimination: evidence from East Asia. Review of Development Economics 8(2): 237-254.

Berik, Gunseli. 2000. Mature export-led growth and gender wage inequality in Taiwan. Feminist Economics 6 (3): 1-26.

Bhattacharya, Debapriya and Mustafizur Rahman. 1999. Female employment under export propelled industrialization: Prospects for internalizing global opportunities in the apparel sector in Bangladesh, Occasional Paper No. 10, United Nations Research Institute for Social Development (UNRISD).

Bisgrove, E. Z. and B. M. Popkin. 1996. Does women’s work improve their nutrition: Evidence from the Urban Philippines. Social Science and Medicine 43(10): 1475- 1488.

Bliss, C.J. and N. H. Stern. 1978. Productivity, wages, and nutrition, Parts I and II. Journal of Development Economics 5 (4): 331-362.

Braunstein, E. and M. Brenner. 2007. Foreign direct investment and gendered wages in urban China. Feminist Economics 31(3-4): 213-237.

Brecher, R. A. and C. F. Diaz Alejandro. 1977. Tariffs, foreign capital and immiserizing growth. Journal of International Economics 7: 317–22.

Carr M., M. Chen, and J. Tate. 2000. Globalization and home-based Workers. Feminist Economics 6(3): 123–142.

Caves, R.E., J.A. Frankel and R.W. Jones. 1990. World Trade and Payments. 5th ed. London: Scott, Foresman/Little, Brown Higher Education.

Chamarbagwala, R. 2006. Economic liberalization and wage inequality in India, World Development. 34(12): 1997–2015.

Chaudhuri, S. 2005. Labour market distortion, technology transfer and gainful effects of foreign capital. The Manchester School 73(2): 214-227.

Chaudhuri, S. 2007. Foreign capital, welfare and unemployment in the presence of agricultural dualism. Japan and the World Economy 19(2): 149-165.

Chaudhuri, S., S. Yabuuchi and U. Mukhopadhyay. 2006: Inflow of foreign capital and trade liberalization in a model with an informal sector and urban unemployment. Pacific Economic Review 11: 87-103.

Corley, M., Y. Perardel and K. Popova. 2005. Wage inequality by gender and occupation: A cross-country analysis. Employment Strategy Papers No. 20, International Labour Office.

Duncan, T. 1997. Incomes, expenditures and health outcomes: Evidence on intrahousehold resource allocation. In Intrahousehold Resource Allocation in Developing Countries: Models, Methods and Policy. ed Haddad, L., J. Hoddinott and H. Alderman. Baltimore and London: The Johns Hopkins University Press.

Fontana, M. 2002. Modelling the effect of trade on women at work and at home: a comparative perspective. Paper presented at SIAP Workshop, 7-8 November, in Brussels, Belgium. http://www.cepii.fr/anglaisgraph/communications/pdf/2002/siap1102/fontana.pdf

Fontana, M. and A. Wood. 2000. Modelling the effects of trade on women, at work and at home. World Development 28 (7).

Guyer, J. 1988. Dynamic approaches to domestic budgeting: cases and methods from Africa. In A home divided: women and income in the third world, ed D. Dwyer and J. Bruce. Stanford: CA.

Hazarika, G. and R. Otero. 2004. Foreign trade and the gender earnings differential in urban Mexico. Journal of Economic Integration 19 (2): 353-373.

Herz B. and G. B. Sperling. 2004. What works in girls’education. Evidence and Policies from the Developing World, Council on Foreign Relations.

Hoddinott, J. and L. Haddad. 1995. Does female income share influence household expenditure? Evidence from Cote d’Ivoire. Oxford Bulletin of Economics and Statistics LVII: 77–97.

Hoque, S. 2009. The impact of tariff reduction on Bangladesh economy: a computable general equilibrium assessment. MPRA Paper No. 16246, http://mpra.ub.uni-muenchen.de/16246/

Joekes, Susan P. and Ann Weston. 1994. Women and the new trade agenda. New York: United Nations Development Fund for Women.

Jones, R.W. 1971. A three-factor model in theory, trade, and history. in J. Bhagwati et al (eds.), Trade, Balance of Payments, and Growth, Chapter 1. Amsterdam: North-Holland.

Kabeer, N. 2000. The power to choose: Bangladeshi women and labour market decisions in London and Dhaka. London: Verso.

Khan, M. Z. 1999. Liberalization and Economic Crisis in Pakistan: Vol. 9 - Pakistan. In Rising to the Challenge in Asia: A Study of Financial Markets (pp. 1-35). Manila, Philippines: Asian Development Bank.

Kurz, K. M. and C. J. Welch. 2000. Enhancing nutrition results: The case for a women’s resources approach. International Center for Research on Women.

Kusago, T. and B. Barham. 2001. Preference heterogeneity, power, and intrahousehold decision-making in rural Malaysia. World Development 29(7): 1237- 1256.

Leibenstein, H. 1957. Economic backwardness and economic growth. New York: Wiley.

Marjit, S. and H. Beladi. 1996. Protection and gainful effects of foreign capital, Economics Letters 53: 311-326.

Marjit, S., U. Broll and S. Mitra. 1997. Targeting sectors for foreign capital inflow in a small developing economy. Review of International Economics 5: 101-106.

Menon, N. and Y. Rodgers. 2009. International trade and the gender wage gap: new evidence from India's manufacturing sector. World Development 37(5): 965-981.

Oostendorp, R. 2004. Globalization and the gender wage gap. World Bank Policy Research Working Paper 3256.

Park, C. 2001. Is extended family in low-income countries altruistically linked? Evidences from Bangladesh. Working Paper No.0107, National University of Singapore, Department of Economics.

Paul-Majumder, P. and A. Begum. 2000. The gender imbalances in the export-oriented garment industry in Bangladesh. Gender and Development Working Paper 12 World Bank, Washington, DC.

Quisumbing, A. R., L. Haddad, R. Meinzen-Dick, and L. R. Brown. 1998. Gender issues for food security in developing countries: Implications for project design and implementation. Canadian Journal of Development Studies XIX, Special Issue: 185-208.

Ramachandran, N. 2006. Women and food security in South Asia: current issues and emerging concerns. UNU- WIDER Research Paper No. 2006/131.

Reilly B. and P. Vasudeva Dutta. 2005. The gender pay gap and trade liberalisation: Evidence for India, PRUS Working Paper no. 32.

Seguino, S. 2002. Promoting gender equality through labor standards and living wages: An exploration of the issues. Paper prepared for presentation at Global Labor Standards and Living Wages Conference, PERI, Amherst, MA, April 19-20, 2002.

Sen, G. and P. Östlin. 2007. Unequal, unfair, ineffective and inefficient gender inequity in health: Why it exists and how we can change it. Final Report to the WHO Commission on Social Determinants of Health.

Sharma, N. 2007. Gender inequality and women’s health: An empirical study of the factors affecting their health. Paper presented at the annual meeting of the Southern Political Science Association, Hotel Intercontinental, New Orleans, LA, Jan 03, 2007, http://www.allacademic.com/meta/p143276_index.html>

Siddiqui, R. 2007. Modelling gender dimensions of the impact of economic reforms in Pakistan, MPIA Working Paper 2007-13, PEP.

Siddiqui, R. et al. 2006. Gender and Empowerment: Evidence from Pakistan. Pakistan Institute of Development Economics, Islamabad, Pakistan.

Siegmann, K.A. 2006. Globalisation, gender and equity – effects of foreign direct investment on labour markets in rural Indonesia, Journal of Economics 3(1): 113-130.

UNCTAD. 1999. World Investment Report 1999, New York: UNCTAD.

United Nations. 1999. World Survey on the role of women in development: Globalization, gender and work. New York: United Nations.

Vijaya R. M. and Linda Kaltani. 2007. Foreign direct investment and wages: a bargaining power approach. Journal of World-Systems Research 13(1): 83-95.

Von Braun, J. and E. Kennedy. 1994. Agricultural commercialisation, economic development and nutrition. Baltimore: The Johns Hopkins University Press for IFPRI.