[Reducing gender disparities can lead to improved macroeconomic performance. The recognition that gender disparities are harmful and that government budgets are not gender neutral implies a need to incorporate gender considerations into the budgeting process. Although gender-budgeting initiatives can take many different forms, their most important purpose is to influence the budgeting process and help policymakers focus on ways that public policies can help reduce gender disparities and improve economic outcomes.]
Why using the budget to empower women makes good economic sense
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| Image credit : Focus on Poverty |
Gender differences have long been incorporated into economic
analysis at the microeconomic level in such fields as public finance, labor,
and development economics. For instance, different migration patterns for men
and women in developing countries from rural to urban areas have long been a
staple of models in development economics and contribute to our understanding
of the overall development process. But more recently, the focus has turned to
the potential macroeconomic implications of gender differences in behavior—both
for understanding economic developments and for formulating sensible policies
(Grown, Elson, and Cagatay, 2000). Gender differences in behavior that are the
outcome of private decisions or reflect the influence of public policies may
lead to different outcomes in the macroeconomy, with implications for aggregate
consumption, investment, and government spending and, hence, national output.
Yet fiscal policies are rarely formulated to take account of gender.
Although much of the work is innovative, the literature is
incomplete in two areas. First, it does not always draw out the macroeconomic
implications, even when drawing on microeconomic evidence on gender differences
in behavior. Second, because it is somewhat disjointed from the broader
macroeconomic literature, scholars working in either field often fail to fully
recognize each other's contributions. Two recent IMF studies focus on the
interaction between gender and macroeconomics and gender and budget processes.
This article gives a snapshot of both these topics.
Improving women's opportunities
Women remain disadvantaged, especially in the poorest countries.
Their opportunities for educational, social, and economic advancement are
usually markedly inferior to those of men, and they often face barriers in
gaining access to good education and health care for both economic and cultural
reasons. The end result—in low and some medium human development countries—is a
lower level of education attainment for girls than boyas and a lower life
expectancy for women relative to men that would be expect (see Table 1). The
so-called missing women phenomenon, where there are fewer women than would be
expected on the basis of biological norms, is also indicative of the continuing
bias against women. In the job market, women face lower wages and fewer job
opportunities, and they continue to encounter discrimination in financial
markets. Women also usually have fewer opportunities to participate in public
decision making.
Table 1
Gender inequalities persist On a global scale—especially in low human development countries—girls do less well in school enrollment than boys, and women's life expectancy relative to men's is lower than would be expected.
Source: World Bank, World
Development Indicators; United Nations, Human Development Report (2004);
and IMF staff calculations.
Note: Data are from 2001–02 and cover the whole world. |
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The eight UN Millennium Development Goals (MDGs)—which were
adopted in 2000 to sharply reduce poverty and improve living standards by
2015—explicitly link economic progress to creating equal opportunities for all
men and women. One of them, MDG3, calls for redressing gender disparities and
empowering women (see article, page 6).
Incorporating gender into macroeconomics
It is not that obvious how to go about incorporating gender
differences in economic behavior and policy outcomes into macroeconomic
policymaking. After all, in macroeconomics, one typically looks at the
aggregate, or overall, economy. But economists are now taking a much stronger
interest in how gender affects aggregate income as well as key components of
overall economic demand, focusing on household decision making.
Although the evidence about the relationship between women's
inferior status and growth is not fully conclusive—measuring the degree of
inequality or disadvantage in comparison with men is a complex topic in
itself—research findings suggest that countries that take steps to increase
women's access to education, health care, employment, and credit, thereby
narrowing the differences between men and women in terms of access to economic
opportunities, increase their pace of economic development and reduce poverty
(Klasen, 2007; and World Bank, 2001).
Consumption. One of the best-documented findings, with
evidence spanning many developing countries, is that when women have greater
control over the spending of their households' resources, they devote a larger
share of spending to foster the potential of their children and purchase
household necessities. Because greater investment in education is linked to
higher growth and because spending on necessities is more stable than spending
on luxuries, raising women's economic influence within the household may
enhance overall growth and reduce economic instability. In countries where
women's opportunities to earn a living are limited by economic and cultural
factors, public policies could therefore benefit from being geared to enhancing
women's employment and earnings possibilities. Examples of policies that
encourage women to work outside the home include subsidies for preschool
programs and a reduction in high marginal tax rates applying to secondary
earners within the household.
Savings and investment. Theory suggests a number of reasons why
women might have different savings preferences than men, including the need to
provide for a longer life expectancy. The empirical work on savings and
investment is scarcer than on consumption. Some evidence suggests that
enhancing women's control over resources does in fact lead to a higher saving
rate, but further study is needed to draw any firm conclusions. Evidence from
microcredit lending indicates that women tend to have superior repayment
records and invest more productively. Data from developed nations on the
allocation of financial assets suggest that women tend to be more averse to
risk. Although this may slow growth economy-wide, it may at the same time
impart greater stability to investment and financial markets. The external
balance, which reflects the gap between domestic savings and national
investment, may also be altered by the influence of gender on saving and
investment decisions.
Public choice. Recent research suggests that expanding
women's political voice and power may increase the demand for redistributing
income and for public insurance, for instance, through increased spending on
social security programs and maternity or unemployment compensation. Such
preferences could lead to a larger overall size of government, with uncertain
implications for overall economic growth.
Taken together, these gender-based differences suggest that
raising women's economic power can lead to higher rates of economic growth and
reduce volatility. Much of the evidence is microeconomic in nature, but
macroeconomic conclusions can be drawn from microeconomic modeling as long as
the behaviors are systematic and pervasive and thus have an impact at the
aggregate level.
In countries with the lowest average income and in which
agriculture remains the main source of economic activity—such as in sub-Saharan
Africa—women's lack of education, health care, and employment opportunities
prevents them from being able to fully benefit from improved macroeconomic and
structural policies, hindering economic growth (Collier, 1988; and Blackden and
Bhanu, 1999). Where women have broader opportunities, the growth of
export-oriented industries, supported by trade liberalization, has been shown
to stimulate growth in many developing countries and increase women's
employment. South Asia and Southeast Asia—where export trade has led to a
dramatic increase in women's paid employment opportunities—are examples of this
phenomenon. Financial liberalization has also improved economic opportunities for
women, in part through greater access to credit. But greater volatility may be
burdensome to households with marginal finances, which are disproportionately
headed by women.
Budgeting for gender
One way for countries to pinpoint policies needed to reduce
gender disparities is through gender budgeting, which involves the systematic
examination of budget programs and policies for their impact on women. This
effort to mainstream gender analysis into government policies has gained
prominence in recent years, in part thanks to a big push by the 1995 Beijing
World Conference on Women. This type of budgeting promotes greater
accountability on how governments are doing in terms of promoting gender
equality and helps ensure that budgets and policies are geared toward achieving
gender equality. It is not intended to analyze only programs that are
specifically targeted to females or to produce a separate "women's"
budget. Rather, it is intended to examine the gender effects of all government
programs and policies.
One might ask: Why budget with only gender in mind? What about
other groups in the population whose interests may have received insufficient
attention? In principle, budget processes should take into account the
elimination of any disparities that are socially harmful. Some groups, such as
the elderly and some racial minorities, have in fact organized themselves to
assert their interests.
What is clear is that there is no such thing as a gender-neutral
government budget. For instance, cutting back on clean water spending may
disproportionately harm women and girls because they typically bear the time
and physical burden of providing clean water to households when it is not
readily available. Similarly, increasing school fees may disproportionately
reduce girls' opportunities to attend school, just as reducing a tax credit for
child-care expenses may disproportionately burden women, who are responsible
for the greater share of child-rearing activities.
Is there an economic justification for gender budgeting? This
article has argued that reducing the disadvantaged status of women can be
linked to a higher rate of economic growth and to greater economic stability,
which yields benefits that the private market, when left to itself, may not
fully take into account. And, because some of the benefits of reducing these
inequalities, such as the influence of better education on fertility and child
health, may manifest themselves only over the medium term, it is essential to
place gender budgeting in the medium-term context of the budget. Even if
reducing gender inequalities does not necessarily improve growth but simply
creates a fairer society, there is a justification for public intervention.
How does gender budgeting work in practice? Individual
initiatives have taken a wide variety of forms. They can entail the preparation
of a separate document that assesses the implications of government programs
for women, which is then presented with the budget. They can be integrated into
departmental processes and program analysis on an ongoing basis so that all
programs and policies are assessed on how they contribute to raising the status
of women and girls. And they can be formal budget submissions or simply
"white" papers drawn up by interested groups outside the government.
Evaluating expenditure effects. Specific tools have been developed to
integrate gender budgeting into the standard budget process (Budlender and
Hewitt, 2002; and Budlender and others, 2002). In its typical application, the
expenditure incidence is evaluated by disaggregating government spending into
those categories that are seen as benefiting women and girls and those that
have more general purposes (which tend to comprise the vast bulk of spending).
Gender-budgeting initiatives may also focus on public employment.
Evaluating revenue effects. More recent initiatives attempt to assess
revenue policies. The personal income tax is one of the taxes that fit easily
into this framework because it is personalized to individuals, who file on the
basis of their own (or joint) income. In the past, many countries discriminated
explicitly against women in the personal income tax, but today that number is
falling. In developed countries, discrimination is almost entirely gone, but in
developing countries, it is still possible to find personal income taxes with
such gender-biased attributes as assigning, for tax purposes, all nonwage
income to the husband regardless of who owns the property (embodying the
assumption that a woman's property belongs to her husband); or assigning larger
allowances to men, reducing their effective tax rate; or applying a reduced tax
rate on the same income. Indirect taxes, such as the value-added tax, corporate
income taxes, and international trade taxes are not personalized. Yet an
implicit gender bias can be found in such taxes through patterns of incidence
that may differ by gender. There may, for example, be a bias against men in
excise taxes that fall heavily on alcoholic beverage consumption, smoking, and
gambling—activities that are undertaken disproportionately by men in virtually
every society.
How gender budgets have fared
Since 1984, some 40 countries from all regions of the world have
tried some form of gender budgeting, typically at the national level but in
some cases at the subnational level. The initiatives have been led by the
government (the executive or legislative branch) or by civil society. Most of
these initiatives have focused on the spending side of the budget, but a few
countries have looked at the revenue side as well.
Australia was the first country to formally incorporate gender
budgeting by developing the concept of a women's budget. South Africa followed
suit in 1995 as part of its push to eliminate inequalities following the end of
apartheid. One tangible result in South Africa was the elimination of gender
discrimination from the personal income tax, where some women were taxed more
heavily than men with equivalent income. In the European Union, gender equality
has long been a priority, with gender-budgeting initiatives under way in a
number of countries, including in Scandinavia and Spain. Other initiatives
include the Women's Budget Group in the United Kingdom, which comments on the
fiscal policies of each annual budget. In India, researchers have assessed the
adequacy of budgetary programs to address women's needs and reduce gender
disparities. In Mexico, nongovernmental organizations have worked with federal
and state governments to combine solid academic analysis with advocacy for
gender equality and poverty reduction within the budgetary context. And in
Rwanda, a gender-budgeting initiative is used to inform the national debate
about policy and allocation of resources.
What is the verdict so far? The answer is mixed. In some cases,
such as Australia and South Africa, the initiatives failed to become part of
the institutional fabric after an initial burst of activity. These experiences
demonstrate the need for gender initiatives to become well integrated within
the more general budget processes and to demonstrate their utility. The
initiatives also need to gain broad political support to avoid falling victim
to a change of government.
As a result, several important lessons may be drawn from the
experience to date:
·
Gender budgeting should
be incorporated into standard budget processes so that it becomes fully
institutionalized. Otherwise, even initiatives adopted with enthusiasm may not
be sustained. Some elements of gender budgeting, such as an analysis of
benefits or tax incidence, may require periodic special efforts.
·
It should address
specific goals, such as reducing inequality in educational attainment, that
have clear benefits and can be measured even with somewhat crude tools and data
(see Table 2).
·
It should draw on
civil society for support and assistance with the more research-oriented
aspects, and should apply to subnational levels of government where relevant.
·
It should cover both
spending and revenue.
·
It should not as a
rule set specific goals for spending on women-related objectives (unless
budgets are severely constrained and such spending is well below what an
unconstrained budget would otherwise choose) because this tends to reduce
flexibility, making the budget process less effective.·
Table 2
What a gender budget might look like Two hypothetical examples of gender analysis in a national budget
Source: The author.
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In sum
Our understanding of gender differences in behavior, and of how
public policies have different effects on men and women, has improved in recent
years and is influencing macroeconomic policymaking, especially fiscal policy.
Reducing gender disparities can lead to improved macroeconomic
performance. The recognition that gender disparities are harmful and that
government budgets are not gender neutral implies a need to incorporate gender
considerations into the budgeting process. Although gender-budgeting initiatives
can take many different forms, their most important purpose is to influence the
budgeting process and help policymakers focus on ways that public policies can
help reduce gender disparities and improve economic outcomes.
References:
Blackden, C. Mark, and Chitra Bhanu,
1999, "Gender, Growth, and Poverty Reduction," World Bank Technical
Paper No. 428 (Washington: World Bank).
Budlender, Debbie, Diane Elson, Guy
Hewitt, and Tanni Mukhopadhyay, 2002, Gender
Budgets Make Cents: Understanding Gender-Responsive Budgets (London:
Commonwealth Secretariat).
Budlender, Debbie, and Guy Hewitt,
editors, 2002, Gender Budgets Make More Cents:
Country Studies and Good Practice (London: Commonwealth Secretariat).
Collier, Paul, 1998, "Women in
Development: Defining the Issues," Policy Research Working Paper No. 129
(Washington: World Bank).
Grown, Caren, Diane Elson, and
Nilufer Cagatay, 2000, "Growth, Trade, Finance, and Gender Inequality:
Introduction," World Development,
Vol. 28, No. 7, pp. 1145–56.
Gupta, Sanjeev, Mark Plant, Thomas
Dorsey, and Benedict Clements, 2002, "Is the PRGF Living Up to
Expectations?" Finance
and Development, June, pp. 17–20.
Klasen, Stephan, 2007,
"Pro-Poor Growth and Gender Inequality: Insights from New Research," Poverty in Focus, International Poverty Centre, March,
pp. 5–7.
World
Bank, 2001, Engendering
Development: Through Gender Equality in Rights, Resources, and Voice (New
York: Oxford University Press).
