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Fridays Academy: Gender and Macroeconomics

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


Gender and Macroeconomic Aggregates


Differences in the behavior of men and women may lead to different macroeconomic outcomes, particularly for such important macroeconomic aggregates as private consumption, saving and investment, and composition of government expenditure.  Gender budgeting has become an important issue in most countries over the past few decades and we will examine the methods and country-experience of gender budgeting in future postings.  The next weeks we will examine gender and consumption and gender and savings. We first contextualize the discussion by examining the linkages between the household and its gender composition and macroeconomic aggregates. 


The Household and Macroeconomic Aggregates

Dissatisfaction with the neoclassical model of the household that traditionally viewed the household as single decision-making entity led in the 1960s to New Household Economics. Subscribed to initially by Schultz (1961, 1974) and Becker (1964, 1965), the household was subsequently viewed as a multiple decision-making entity where individuals made decisions to invest in their own human wealth as well as decisions to invest in nonhuman wealth. The neoclassical production function approach was unable to deal with multiple decisions and so individual preferences within a household were modeled separately and examined in the context of household behavior and implications for economic policy.  Stotsky (2006) references Strauss and Thomas, 1995; Behrman, 1997; Hoddinott, Alderman, and Haddad, 1997; Vermeulen, 2002; and Quisumbing, 2003 as principal contributors to the literature showing that ‘household behavior does reflect the outcome of the interactions between household members with diverse preferences and resource endowments’ (Stotsky, 2006; p. 8).   


New Household Economics facilitated a greater flexibility with regard to the structure of policies needed to achieve any particular outcome.  This was even in-spite of the added complexity of the household to the modeling process and the fact that policy responses may not be assured - members of a household may respond differently to the economic environment and/or economic policies may have different effects on members of the household.   


Much of the evidence to support the thesis that household composition influences macroeconomic variables derives from the microeconomic context of the household. Authors such as Deaton (1992) argue that aggregated microeconomic data is a valid basis for forming macroeconomic conclusions.  As noted by Stotsky (2006) “at a disaggregate level, there is evidence to suggest that household composition my influence the full range of economic variables of choice to the household, including consumption, savings, investment, risk-taking behavior, and labor supply” (Stotsky, 2006; p. 8).  Given that gender relations influence decisions taken within the household, we expect to see the implications of these decisions at the macroeconomic level. 

Research on gender related consumption patterns at the intra-household level refutes the unitary model of the household. The collective model presumes that individuals within the household differ in their preferences, rights, responsibilities and resources (Quisumbing and McClafferty, 2003) As discussed above, the latter assumes that all resources and responsibilities within the household are pooled to achieve a common set of goals.  The evidence suggests however that bargaining rather than cooperation characterizes household decisions.  Individuals within the household use the resources they control to pursue their own priorities - the distribution of resources within the household matters. Policies that affect that distribution and shift the balance of power have clear implications for gender equality, the macro-economy and family welfare.  The figure below illustrates the gender dynamic at the level of the household.


Gender and the Household


                                                                                                                                                                                                              Source: Breda Griffith, Raj Nallari


Data from the Demographic and Health Surveys carried out by UNDP suggest that for only 10 of the 30 developing countries surveyed did 50 percent of the women participate in all household decisions.  Decisions included their own health care, major household purchases, daily household spending and visits with family and/or relatives outside the household.  Figure below examines the proportion of women who say that their husbands alone make the decisions regarding their health. 


Many husbands are making the decisions alone on their wife’s health


                                                                                                                                                              Within the household, the person who controls the resources also makes the decisions with respect to expenditures on education, health and nutrition.  Figure below examines the proportion of women who say that their husbands make the decisions on household expenditure.  The shares range from a high of 55.7 percent in Malawi to 2.4 percent in Indonesia.   


Proportion of women who say their husbands alone make the decisions on daily household expenditure, 2000-2004.

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