The economic costs of gender discrimination

José Tavares, Tiago Cavalcanti, Mon, 10/01/2007



It is widely recognised that gender discrimination is a pervasive and costly phenomenon and all economies, to a greater or lesser extent, present a gender wage gap which results in lower female labour participation rates and higher fertility. The authors of CEPR DP6477 believe that it is important to provide a model-based macroeconomic estimate for the cost of wage discrimination to aggregate output. They find that the costs are indeed quite substantial which should be a certain concern in any macroeconomic policy aimed at increasing output per capita in the long-run.

The authors design a growth model in which, by choosing suitable values for the parameters, the baseline economy mimics the performance of the actual U.S. economy. Then it is possible to compute the output cost of an increase in discrimination and the findings show that a 50% increase in the gender wage gap leads to a decrease in income per capita of a quarter of the original output. The explanation involves two effects: a direct decrease in the female labour market participation and an indirect one through an increase in fertility.

Overall, 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 explains all the output difference with the U.S. Moreover, the authors find that the increase in fertility due to discrimination is responsible for almost half of the decrease in output per capita. Therefore, many countries may increase their output by discouraging gender inequality and promoting better use of their workforce.

DP6477 The Output Cost of Gender Discrimination: A Model-Based Macroeconomic Estimate

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Topics:  Labour markets

Tags:  economic development, female labour force participation, fertility, gender inequality


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