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

1. 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)

2. Key Question and Controversies What 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 aggregation Time horizon Market structure and power

3. Theory and Empirical Analysis To 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…

4. 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.

5. 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.

6. 2nd and Feedback Stages: Trade and intrahouseholddynamics • 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

7. Trade Growth Gender inequality Distribution Poverty

8. Main Messages What 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)

9. Main Messages However: • Even if trade liberalization brings gender effects, these tend to be of a small and sometimes uncertainsign; • 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)

10. 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.

11. Consuelo in San Pedro Sula

12. 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

13. Aminata in Diourbel

14. 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

15. Consuelo and Aminata live in two different contexts (1995) • Aminata: Senegal 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?

16. 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

17. 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

18. A Summary of our micro results Trade-related Shock Differences in Comparative Advantage Manufactures (LAC) Agriculture (SSA) Increase in Demand for Female workers Increase in exports of cash crops Usually controlled by men Gender income gap ↑ HH Income↑ Gender wage gap↓ HH Income↑ Lower investment In Human Kap Lower supply response Poverty ↓ Poverty ↓ Long term adverse effect

19. 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)

20. Concluding remarks Relationship between Female Labor Force Participation and GDP per capita Household Size and Age of Household Head by Income Group

21. Concluding remarks