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The Output Cost of Gender Discrimination: A Model-Based Macroeconomic Estimate


  • Cavalcanti, Tiago V. de V.
  • Tavares, José


Gender-based discrimination is a pervasive and costly phenomenon. To a greater or lesser extent, all economies present a gender wage gap, associated with lower female labor force participation rates and higher fertility. This paper presents a growth model where saving, fertility and labor market participation are endogenously determined, and there is wage discrimination. The model is calibrated to mimic the performance of the U.S. economy, including the gender wage gap and relative female labor force participation. We then compute the output cost of an increase in discrimination, to find that a 50 percent increase in the gender wage gap leads to a decrease in income per capita of a quarter of the original output. We then compile independent estimates of the female to male earnings ratio for a wide cross-section of countries to construct a new economy, in line with the benchmark U.S. economy, except for the degree of discrimination. We compare the level of output per capita predicted by this model economy with the actual output per capita for each country. Higher discrimination leads to lower output per capita for two reasons: a direct decrease in female labor market participation and an indirect effect through an increase in fertility. We find that for several countries a large fraction of the actual difference in output per capita between the U.S. and the different economies is due to gender inequality. For countries such as Ireland and Saudi Arabia, wage discrimination actually explainsall of the output difference with the U.S. Moreover, we find that the increase in fertility due to discrimination is responsible for almost half of the decrease in output per capita, and equivalent to the direct decrease in output due to lower female participation. Our basic model suggests the costs of gender discrimination are indeed quite substantial and should be a central concern in any macroeconomic policy aimed at increasing output per capita in the long-run.

Suggested Citation

  • Cavalcanti, Tiago V. de V. & Tavares, José, 2008. "The Output Cost of Gender Discrimination: A Model-Based Macroeconomic Estimate," Proceedings of the German Development Economics Conference, Zurich 2008 43, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec08:43

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    Cited by:

    1. Romina Kazandjian & Lisa L Kolovich & Kalpana Kochhar & Monique Newiak, 2016. "Gender Equality and Economic Diversification," IMF Working Papers 16/140, International Monetary Fund.
    2. Stephan Klasen & Francesca Lamanna, 2008. "The Impact of Gender Inequality in Education and Employment on Economic Growth in Developing Countries: Updates and Extensions," Ibero America Institute for Econ. Research (IAI) Discussion Papers 175, Ibero-America Institute for Economic Research.
    3. Lisa L Kolovich & Sakina Shibuya, 2016. "Middle East and Central Asia; A Survey of Gender Budgeting Efforts," IMF Working Papers 16/151, International Monetary Fund.
    4. repec:bla:econom:v:84:y:2017:i:335:p:454-479 is not listed on IDEAS
    5. Stephanie Seguino, 2008. "Gender, Distribution, and Balance of Payments (revised 10/08)," Working Papers wp133_revised, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Thomas Bassetti & Donata Favaro, 2011. "A Growth Model with Gender Inequality in Employment, Human Capital, and Socio-Political Participation," CHILD Working Papers wp14_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    7. repec:eee:ecanpo:v:55:y:2017:i:c:p:14-24 is not listed on IDEAS
    8. Astghik Mavisakalyan & Yashar Tarverdi, 2017. "Oil and Women: A Re-examination," Bankwest Curtin Economics Centre Working Paper series WP1706, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    9. Seguino, Stephanie, 2011. "Help or Hindrance? Religion's Impact on Gender Inequality in Attitudes and Outcomes," World Development, Elsevier, vol. 39(8), pages 1308-1321, August.
    10. repec:spr:qualqt:v:51:y:2017:i:5:d:10.1007_s11135-016-0384-4 is not listed on IDEAS
    11. Paulo Júlio & José Tavares, 2017. "The Good, the Bad and the Different: Can Gender Quotas Raise the Quality of Politicians?," Economica, London School of Economics and Political Science, vol. 84(335), pages 454-479, July.
    12. repec:ecr:col070:42660 is not listed on IDEAS
    13. Hillenbrand, E. & Karim, N. & Mohanraj, P. & Wu, D., 2015. "Measuring gender-transformative change: A review of literature and promising practices," Working Papers, The WorldFish Center, number 40647, September.

    More about this item


    Economic Development; Gender Inequality; Female Labor Force Participation; Fertility;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development


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