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Fridays Academy: Gender and Macroeconomic Management

Ignacio Hernandez's picture

As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes.

 

 Impact of Globalization on Gender

Globalization is defined as the increasingly free flow of ideas, people, goods, services, and capital across countries, both North and South. It therefore deals with policies related to trade, finance, flow of information, technology, management know-how, outsourcing of jobs, and immigration and remittances. As a result of globalization, the difference between local and international markets is blurred, and this is impacting upon the structures of employment and a host of other institutions, including household structure and relationships. There are three main hypothesis as to why and when women find more employment opportunities: (i) during periods of labor shortages as during economic expansions only to be released during recessions (buffer or reserve army hypothesis), or (ii) during periods when output in the sectors in which women are over-represented could be rising more rapidly than output in rest of the economic sectors (segmented market hypothesis) or (iii) over time women gradually replace males into what until then were ‘"male jobs" (substitution hypothesis).

 

Transmission mechanisms

There are several transmission channels through which globalization impacts upon the living standard of both men and women. It is not possible to detail the complex interactions between all the elements of globalization and impact on women but a few observations are in order:

First, transmission channel is the ‘openness-growth-inequality-poverty reduction nexus’ where trade and financial opening increases the flow of goods and capital across countries and contribute to growth.  For example, between the 1970s and the1990s, trade in goods and services as a proportion of world GDP increased by about 50%, a significant proportion of which is in manufactured goods, particularly from developing countries, particularly from South and East Asian countries.   This rapid growth in trade of goods and services coincides with rapid GDP growth of these countries. But, the causal direction of this link is debatable – trade, financial and labor flows provide the inputs needed for an economy to growth; but in contrast as seen in a number of countries recently, initial growth attracts domestic and foreign finance, imports, new technology and skilled labor to stimulate further growth. However, it is not just overall GDP growth but the pattern of growth (sectoral composition) that matters. For example, agricultural growth initially helps poverty reduction more than other sectors during early stages of development (e.g. China’s decollectivization period and Green Revolution in India is correlated with benefited the poor and improved food security).  

Second, if rapid growth widens income inequality (as observed in both developed and developing countries during the past two decades), the poor, particularly women are likely to be hurt, because the women generally have less education, less skills and lower wages, and less mobile within and across countries. 

Third, labor mobility should lead to ‘wage equalization’ but labor migration across countries makes it less likely for wage equalization. 

Fourth, capital in search of higher rates of return is supposed to move towards poorer countries and in this process raise marginal productivity and labor wages in the developing countries. However, as Lucas Paradox now confirms, capital is moving not from richer to poorer countries (but amongst developed countries) because of reasons of mis-governance, higher uncertainty, and lack of infrastructure in developing countries and also because of the need for risk diversification (particularly by large institutional investors). 

Fifth, developing countries that have relied less on foreign capital have grown more rapidly, implying that domestic savings and investments are key to developing countries as demonstrated by East Asian countries.

 

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