For the last few decades, female empowerment has become an ever increasing component of international development. Many studies have proven that conditional and unconditional cash transfers to women have had substantial impacts on human development through education and health. Under Bolsa Familia and Progresa/Oportunidades, cash transfers are given to mothers based on whether their children go to school or get preventive health care. These programs have been proven to increase school attendance. In a different realm, micro-finance institutions, such as Grameen Bank and BRAC in Bangladesh, have focused their lending to women. This is largely because women are considered to invest more wisely and repay loans more often than men.
Much of the research rests on the assumption that men and women have different preferences, generally speaking. The idea is that men prefer to spend more money on consumption goods, like clothes or alcohol, while women prefer to spend money on goods that benefit the household as a whole, such as education or healthcare. Experiments have seen this played out in numerous, creative ways. Esther Duflo and Christopher Udry showed that in Cote d’Ivoire, men and women farmed different crops, with male crops being sold for profit and female crops being used for consumption by the household. Essentially, an increased production of female crops led to more food consumption and nutrition, while male crops had no effect on food consumption and nutrition. In another study in South Africa, grandmothers were more likely improve the nutrition of children, and especially young girls, compared to the grandfathers.
Within this context, a new paper by Matthias Doepke and Michele Tertilt has come out with the provocative title “Does Female Empowerment Promote Economic Development”? The argument behind the article is that different spouses don’t have separate preferences but that they have different comparative advantages in the household. In the model by Doepke and Tertilt, one spouse has a higher wage while the other spouse has a lower wage. Human capital, such as education and nutrition, is considered to be a comparative advantage for the spouse with a lower wage, which tends to be the wife. A transfer from the husband to the wife tends to lead to more investment in education and nutrition, along with consumption by the wife for herself. All this is at the expense of the husband spending money on himself.
At an economy-wide level, the husband is considered to have more physical capital, such as land or farming equipment, while the wife has more human capital, such as education and child rearing. The distinction between the two is that the land, farming equipment, or other physical assets are passed onto the children. Theoretically, cash transfers between spouses increases spending in general, at the expense of savings and investment that could be used on physical assets. If the economy as a whole is more service-based or dependent on education and knowledge, cash transfers would be more beneficial to economic growth in general. However, if the economy is based more on physical capital, such as farm land or industrial equipment, then transfers to the wife may be slightly detrimental as there would be less to leave to the children. No matter the economic structure, growth is affected by higher inequality between the spouses. Once there is no wage difference between the spouses, there is no effect on transfers, meaning that no matter the situation, wage parity is a desirable outcome.
All cash transfers, conditional or unconditional, are not necessarily bad or should be stopped. The structural context of employment, equity, and capital affects female empowerment’s effect on economic development. Places such as Latin America, where the service sector is a more important component of the economy, are more likely to increase sustained growth through female empowerment. There are many assumptions inherent in this article, particularly since this is an economic model not based completely on empirical evidence. The overall environment is just important as the cure.
Blogal Prosperity by the Center for Global Prosperity 