Women’s Work and Economic Development

The purpose of this paper is to examine changes in women’s labor force status with economic development as discussed by Mammen and Paxson. In particular, the paper focuses on a simple textbook model of how women’s labor supply and type of work change at different stages of economic development. In addition, the cross-country data, along with the case study data on two developing countries are examined to see if the results are consistent with the model. The paper then argues that there is a need to measure women’s societal status via examining levels of gender discrimination and inequality in resource allocation to have a better understanding of women’s work status in the poor countries. Finally, the paper aims to explain the importance of women’s labor force status in determining why rich countries are rich and poor countries are poor.

Model

One of the consensually recognized models explaining woman’s decision to engage in the labor market focuses on the importance of opportunity cost and the “unearned” income. Before going any further in the discussion, it is worth noting that the model discussed by Mammen and Paxson assumes competitive labor markets. In this model women’s labor supply is affected by the opportunity cost of women’s time, which is equal the existing wage for women with her education, skill levels, and experience.  It is also affected by the “unearned” income that includes the earnings of the husband, other profits, and transfer income. Any increases in the “unearned” income for women increase the possibility of the women’s withdrawal from the labor force (p. 142).

Keeping the two determinants of women’s labor supply decision in mind, Mammen and Paxson go on to investigate changes in women’s labor supply with the economic development. The cross-country longitudinal data (90 countries from the 1970s and 1980s) points out a persistent U-shaped relationship between the women labor supply and the economic development (p.145). Mammen and Paxson explain this pattern as following:

“For very poor countries, female labor force participation is high, and women work mainly in farm and non-farm family enterprises. Development initially moves women out of the labor force, partly because of the rise in men’s market opportunities and partly because of social barriers against women entering the paid labor force. However, as countries continue to develop, women’s education level rise, and women move back into the labor force” (p.143-144).

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The authors explain that the observed pattern emerged as a result of the perceived social norms that are constant across the three steady states of economic development (p.144). Initially the poverty trap induces high men and women labor force participation. Since the model assumes that at this stage only men are educated, there are possibilities for men to engage in work outside of the domain of the family farm or non farm family enterprise. However, at this stage the possibilities for women are limited only to participation in the farm or non farm family enterprises because of the customs, laws or social norms that prevent women from working outside of home. Hence, the low level of human capital explains the left part of the U-shaped curve. With the economic development (i.e. industrialization, introduction of new technology), there is an increase in men’s labor supply, but a reduction in women’s labor supply. The authors suggest the observed decrease in women’s labor supply is a result of a decrease in female agricultural work during shifts to urbanization and non-agricultural production. Social stigma, women’s or employer preferences may also hinder women’s employment in manufacturing. Women are primarily held back by cultural and household responsibilities, increases in the incomes of their husbands, and their own preferences to avoid working long hours and activities that are harmful to their health. At the third stage of the development, the upward portion of the U-shaped curve occurs when women return to the labor force at advance stages of development to fill the “white-collar” jobs that are acceptable forms of employment for women (p.143-145).

Another important layer of information to be considered in discussing the U-shape relationship between female labor force participation and economic development is the level of female education attainment. Taking evidence from the cross country data, Mammen and Paxson suggest that women’s education levels rise with the increases in income. They estimate an average rise in education of six years with an increase in per capita GDP from 1000 to 10,000 US dollars (p. 146).  Furthermore, the economists argue that the increasing trend in education attainment level of women results in U-shape relationship between women labor force participation and economic development. As it was mentioned above, at low levels of income a large number of women participates in the labor force as unpaid family workers on the farms or family enterprises with virtually zero levels of education. During the process of industrialization, men’s incomes and labor supply increases while women’s labor force participation declines. This may be a result of women’s inability to compete with men because of women’s lower educational attainments in the industrial sector. However, as women’s education improves their labor force participation rises as in the rising portion of the U-shaped curve. This implies that higher rates of investment in women’s education could overcome possible reductions in women labor force participation rates (p.147-149).

Linked to the increases in women’s income level and labor force participation rate is the observed reduction in total fertility rates. Mammen and Paxson indicate that with the rise in income there is an increase demand for children, however, there is also a reduced demand for children due to the higher opportunity cost of women’s time (p.150). For instance, the time spent raising a child could be used to attain higher levels of education. Women’s education increases opportunities for earning income and is the key factor in leading women to choose to have fewer children.  Therefore, if the costs of having more children overweigh the benefits, one observes a decline in the fertility rates. Although the cross country analysis suggests that increases in women’s incomes cause the fertility rates to decline, there is a number of other factors that might contribute to the reduction in the fertility rates. Such factors include changes in the perceived cultural norms (i.e. elderly income support from their children is replaced with a pension system) and a decrease in child mortality rates that come about as a result of the increases in the GDP (p.150-151).

Case Study Analysis: Thailand and India

After acknowledging the underlying model of women’s work and economic development, Mammen and Paxson seek to find cross-country evidence to support their claims. The authors choose two developing countries (Thailand and India) that completely differ in their recent growth experiences, status of women, and the distribution of land. While Thailand, before its recent economic crisis, had experienced rapid economic growth during the past few decades, India had been poorer and grown more slowly. Historical data suggests that women’s labor force participation rates have been higher in Thailand than in India.  In Thailand, women have land ownership rights whereas social norms in India prevent women from having any control over the land. The ownership of land is also fairly evenly distributed in Thailand whereas in India it is not. As a result, the work activities and job characteristics of both men and women differ across the two countries (p.151).

Despite these vast differences, the cross-sectional household-level data reveals female labor force participation in the rural areas follows the U-shaped pattern observed in the cross-country data from the 90 countries during the 1970s and 1980s (p.152-154). At low levels of income when agriculture is the dominant form of economic activity women participate in the labor force in large numbers. With economic development women’s labor force participation rate drops, but then increases with further economic advancement. Hence, one observes an increase in the women’s labor force in the urban areas of both Thailand and India. Even though the U-shape relationship holds true for the two countries, the researchers emphasize that it is more pronounced in India than Thailand and that the female labor force participation rates are much lower in India due to the countries’ differences in the land distribution.

Moreover, Mammen and Paxson find that women’s educational attainment is associated with the probability of white collar employment, suggesting that education may play a role in the upward slope of the U-shaped curve. For instance, secondary schooling is associated with zero and low increases in the women’s labor force participation in Thailand and India respectively, whereas postsecondary education is associated with an increase in the women’s labor force participation in both countries. Furthermore, due to the social custom in India, higher spousal education hinders women’s employment in manufacturing. However, the data reveals a positive relationship between higher levels of spousal education and women’s employment in the “white-collar” industries. In Thailand the absence of the social stigma that is present in India, results in a positive relationship between higher levels of spousal education and women’s employment in the “blue-collar” and “white-collar” industries (p.156).  Evaluation of the observed conditions in the two developing countries suggests that educational attainment is indeed associated with the U-shaped relationship between women’s labor supply and economic development (i.e. initially increases in education attainment of both males and females are associated with lower levels of female labor force participation, however, further increases above the postsecondary level result in increases in the female labor force participation).

Finally, because of such vast differences in women’s work status in the developing and developed countries, the authors attempt to measure women’s societal status by examining levels of gender discrimination and inequality in resource allocation in poor countries. First, Mammen and Paxson discuss the role of discrimination in the education for males and females. They indicate that the female-male educational gap emerged as a result of higher rates of investment in education for boys rather than girls in the developing countries. However, this gap tends to decline with economic development (p.158, 159). Second, female mortality is another important measure of women’s status. The empirical evidence suggests that the ratio of female to male mortality rates has been higher in the developing countries. Again, country’s economic development causes this ratio to decline which indicates an increase in female life expectancy (p.159). A third important factor associated with women’s status is women’s access to and control of the resources such as land and other productive assets. The empirical evidence suggests that women and girls receive fewer resources in the households, have limited or no control over land, and have less access to productive assets such as labor-saving technologies, credit, and extension services. The history has shown that with economic development women’s property rights grow increasing women’s status and bargaining power within the household and community. Therefore, the evidence suggests that women’s status improves with economic development.

Conclusion

It is unquestionable that women play a vital role in the economic development of the country. The evidence cited in the Women’s Work and Economic Development article suggests that women’s work status and their status in the society provides another explanation to why rich countries are rich, and poor countries are poor. Factors such as levels of women’s education, fertility rates, rights to own, inherit land, and own other assets influence women’s labor force status. Despite the importance of all these factors, a continuous increase in the levels of education of girls and women serves as a key factor to improve development outcomes, such as reducing fertility and child mortality rates, and increasing worker productivity. It is often assumed that education enhances women’s well-being and gives them a great autonomy within the society which increases opportunities for participating in the labor force. Hence, improving female’s education could be a useful strategy to build the labor force, as well as to control the fertility and women’s mortality rates in the developing countries.

These results are consistent with the predictions of the macroeconomic models of endogenous and exogenous growth. According to Mankiew, Romer, and Weil, an increase in the amount of time spent on education leads to an increase in income levels and country’s growth rates in the short run. The results found in the article are also consistent with the predictions in the Solow model. According to Solow, a decrease in population growth results in an increase in country’s growth rates. Therefore, increasing the level of female education attainment could ultimately result in higher economic growth.

Female mortality rate is yet another important factor that determines women’s status in the society. In many developing countries, gender discrimination against women results in below the global average women to men ratio. Amartya Sen, in the New York Review of Books, reported that there are a hundred million of women “missing” in parts of Asia and Africa because of unequal access to food, medical care, and other social services. These “missing” women constitute a high portion of human capital that is taken out from the developing countries. As a result, less ideas are created and the opportunity for “leaks and matches” to occur diminishes. Consequently, country’s technological development as well as long term economic growth suffers.

Additionally, improving women’s property rights could also potentially result in higher economic growth. The rise of conservative Islam in the seventeenth century resulted in fewer rights for women. Consequently, the Middle East has struggled economically since then. Giving women rights to own land and other assets increases their creditworthiness which results in the development of the infrastructure and business sector. This development produces more job opportunities for men and women, results in increases in income and education levels for both genders, and might eventually result in an increase in country’s economic growth.

Therefore, in my opinion, women’s labor force participation is an important measurement of women’s status in the developed countries, whereas women’s mortality rates, women’s property rights and their education levels are the most important measurements of women’s societal status in the developing countries.

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