The Impacts of Trade on Gender: What Have We Learned and What Tools Are Used

1
The Impacts of Trade on Gender What Have We
Learned and What Tools Are Used?

• Mohamed Abdelbasset CHEMINGUI
• Trade, Finances and Economic Development
  Division, UN-ECA

2
Context

• Gender economics is attaining increased
  prominence in the debates over development
  policy.
• There is a growing body of evidence and
  experience linking gender awareness in policies
  to equitable, efficient, and sustainable outcome
  in development.
• However these links are still not widely
  understood nor have these lessons been fully
  integrated by national policymakers.
• The assumption that open markets will lead to
  higher growth that benefit all members of a
  country is no more fully shared by economists.
• Many recent studies show that trade
  liberalization has lead to increase in
  subcontracting of women, a decrease in the prices
  of agricultural products produced by women, and a
  masculinisation of typically female employment

3
Impacts of Trade on Gender What Have We Learned?

• The neoclassical theory supports a positive
  correlation between openness to trade on one side
  and employment and wages on the other side.
• The reasoning is as follows trade
  liberalization, often embodied in the expansion
  of exports, stimulates growth. This creates a
  demand for greater workload, and given the law of
  supply and demand, this must be accompanied by an
  increase in real wages.
• Some studies put in doubt these outcomes by
  showing that increased trade openness in
  developing economies may have negative effects on
  both employment and real wages.
• Other studies admit that in best cases trade
  liberalization policy can be without effects on
  employment and real wages in developing
  economies.

4
Impacts of Trade on Gender What Have We
Learned?(Cont.)

• Trade liberalization influences the employment,
  wages, consumption prices, incomes and government
  expenditures.
• Tariff reduction may restrict the short-term
  ability of government to finance social programs,
  leading to cuts in services and privatization.
  Through these channels, trade has an incidence on
  men-women inequalities.
• Comparatively to men, women profit less from the
  new economic opportunities and their adaptation
  process is more difficult because they have less
  time and mobility with regards to their domestic
  tasks.

5
Impacts of Trade on Gender What Have We
Learned?(Cont.)

• Moreover, trade policies affect men and women
  differently due to gender inequalities in access
  to and control of economic and social resources
  and decision-making. Their impact is also
  mediated by the different roles that men and
  women have within societies in particular, the
  gendered division of labor.
• Thus, trade liberalization may be positive or
  negative for women and men, depending on their
  individual (e.g. education and skills) and
  social group characteristics (e.g. net producers
  or net consumers, urban/rural).
• However, there is an agreement among economists
  that trade liberalization is likely to increase
  the employment opportunities for women
  particularly in export oriented sectors such as
  textiles.

6
Impacts of Trade on Gender What Have We
Learned?(Cont.)

• Trade liberalization can also lead to
  unemployment and the restructuring of the labor
  markets.
• This situation can affect more severely poor and
  marginalized groups of women more than men.
• The need for flexible workers to respond to
  market fluctuations can lead to a rise in the
  numbers of informal sector workers, of which a
  high percentage are women.
• Overall, the empirical studies distinguish the
  impacts of trade liberalization on gender
  employment gaps from gender wage gaps. In the
  next slides, the main results of some empirical
  analysis on the effects of trade liberalization
  on employment and wage gaps are highlighted.
  

7
Impacts of Trade on Gender What Have We Learned
on the effect on gender wage gap?

• Artecona and Cunningham (2002) found that trade
  liberalization is associated with higher gender
  wage gaps in the Mexican manufacturing sector.
  This is likely due to an increased premium to
  mens higher skills while the discrimination
  component of wage differentials seems to fall
  with the increase in international competition.
• These results are confirmed by Gordon and
  Harrison (1999) for their analysis of a sample of
  developing countries. In particular, they found
  that in the industries that were forced to become
  competitive due to trade liberalization, the
  gender wage gap fell.

8
Impacts of Trade on Gender What Have We Learned
on the effect on gender wage gap? (Cont.)

• Becker (1971) already pointed out that
  competitive firms do not have the profits to wage
  discrimination.
• Black and Brainerd (2002) used data to test
  whether increased openness in the period 1977-94
  induced employers to reduce discrimination
  against women, by estimating the differential
  effect of increased imports on concentrated
  versus competitive industries.
• Berik et al. (2003) found the opposite effect for
  the republic of Korea and Taiwan, in the sense
  that an increase in international competitiveness
  between 1980 and 1999 in concentrated industries
  was associated with a wide gender wage gap.

9
Impacts of Trade on Gender What Have We Learned
on the effect on gender employment gap?

• Women also experience more churning that is, more
  frequent hiring, firing, and relocation from one
  job to another (World Bank, 2004).
• A study on Chile by Levinshon (1999) covering a
  period of rapid adjustment, including trade
  liberalization, shows that firms tend to lay off
  a slightly higher proportion of female workers
  when business declines and to hire more women
  when business recovers.
• These results are confirmed by the study on
  Turkey (Ozler, 2001), which founds that female
  employees also had significantly higher job
  relocation rates.

10
The needs for in depth analysis of the impact of
trade agreements on gender

• Despite the different obtained results, studies
  on trade and gender revealed that trade has
  different impact on different group of
  population, thus making a gendered analysis of
  international trade policy a priority (UNCTAD,
  2003).
• These mixed results indicate that the effect of
  trade liberalization on women depends on the
  diversification level of the concerned countries,
  the liberalization process itself, initial
  conditions in terms of economic policies, and the
  structure of labor markets.
• Thus, the impacts of trade on womens or mens or
  even across industries within a country should be
  made on a case-by-case level.

11
Measuring the Impact of Trade on Gender Which
Tools?

• In Africa, there are various levels of
  advancements in trade liberalization. Some
  countries are already embarked in trade reforms
  since the adoption of structural adjustment
  programs in the middle of the 80s while some
  others still negotiating major trade agreements.
• Two alternative approaches are usually used in
  measuring the impact of trade on gender the
  ex-post and ex-ante analysis.
• For countries already advanced in trade openess,
  the purpose could be to identify whether or not
  there is change in the structure of employment
  and wage by gender as result of trade
  liberalization. If yes, are these changes
  attributed to trade liberalization?
• For those countries, not yet opened, the
  objective is quite different. It consists to
  evaluate the effects of trade liberalization
  scenarios on employment and wage by gender.

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What we means by Trade Reforms

• Here we are considering formal trade and
  not-informal trade.
• Formal trade is directly impacted by trade
  agreements while informal trade is out of the
  control of most of governments
• Informal trade such as cross-border trade is not
  governed by trade agreements and none by domestic
  economic policies.
• The purpose is to measure or evaluate the impact
  of trade agreements on a given economy with
  special focus on gender issues

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What Kind of Trade Agreements?

• Globalization agreements under the GATT/WTO
• Accession to WTO,
• WTOs agreement (Uruguay Round, Doha Round)
• Sectoral coverage of the WTOs agreements
  (agriculture, NAMA, service)
• 2. Regional trade agreements
• Customs unions RECs
• FTAs Agadir, EU-ACP, etc.
• Preferential access Cotonou, AGOA,et
• 3. Reforms in Developed Countries Reform of CAP
  or OECD agricultural policies and its impact on
  African countries
• 4. National Trade Reforms
• Reform of NTBs and TBTs
• Custom valuation, etc

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What tools should be used?

• Ex-post analysis specific indicators and
  econometric estimations
• Ex-Ante analysis simulations models
• Forecasting Analysis econometric models

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Models

• Simulation models.
• Goal is to simulate how the economy works.
• Inherently a structural model.
• Use for counterfactual analysis.
• Forecasting models.
• Goal is to forecast endogenous variables, given
  projections of exogenous variables.
• Less interested in how the economy works.
• May use either a reduced-form or structural
  model. Need not be able to identify the
  structural model.

16
Simulation models

• If interested to one sector of the economy a
  sectoral partial equilibrium model is the more
  appropriate
• If interested to few sectors with a small effects
  on the national economy a multi-market partial
  equilibrium model is the more appropriate
• If interested to the whole economy with the
  feedback and interaction effects a computable
  general equilibrium model is the best tool

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CGE models General Features

• CGE models
• Computable ? solvable numerically
• General ? economy-wide
• Equilibrium ?
• optimizing agents have found their best solutions
  subject to their budget constraints
• quantities demanded quantities supplied in
  factor and commodity markets
• macroeconomic balance
• Dynamic-recursive ? the solution in any time
  period depend on current and past periods, not
  the future.

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CGE models

• Actors producers, consumers, government, rest of
  the world
• Motivation profit maximization, utility
  maximization
• Institutions and signals competitive markets and
  prices
• Agent constraints technology, endowments (budget
  constraints)
• System constraints
• Resources (land, labor, capital),
• Macro (trade balance)
• Equilibrium conditions
• Supply-demand balance in all markets
• Macro balances (trade balance, savings-investment,
  government

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Stylized Model Structure
Factor
Domestic Private Savings
Markets
Factor
Wages
Costs
Gov. Savings
Rents
Taxes
Intermediate Input Cost
Sav./Inv.
Households
Government
Activities
Transfers
Private
Government Consumption
Investment
Consumption
Demand
Commodity
Markets
Sales
Imports
Exports
Foreign Transfers
Rest of the
Foreign Savings
World
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Basic Structure of a CGE Model

• Standard CGE models are made up of two different
  parts
• The social accounting matrix other data
• The equations
• The social accounting matrix (SAM) Generalizes
  the input-output principle to all transactions in
  the economy
• The equations
• Specification of agent behavior
• Equilibrium in all markets for goods and factors
• Macroeconomic constraints

21
SAM Structure
22
Construction and Calibration of a CGE Model

• Model solution uses of specific algorithm
• Calibration equivalent to a backward
  solution of the model in order to determine the
  set of parameter values consistent with the
  initial structure of the economy.
• Simulations Evaluate the specific effect of
  changing an exogenous variable on the economy
• Example of simulation with a special focus on
  gender
• The database and the model should includes males
  and females in the labor market by skill or areas
  and sector of occupation. It can also includes
  many types of households according the gender of
  the head.
• Removing tariff barriers on imports from the
  European Union over a period of 10 years (example
  of EPA agreement)
• Models results changes in sectoral GDP and
  trade, consumption by household type and product,
  government revenue, sectoral wage and employment,
  wage and employment by labor type, welfare by
  households type

23
Ex-ante analysis the case of Kenya (work in
progress)

• The methodology is based on a CGE model with
  detailed treatment of labor market, manufacturing
  and agricultural productions, government fiscal
  policy, and income distribution.
• Labor market is being disaggregated into female
  and male, paid and non-paid, and skilled and
  unskilled.
• The model will distinguish the following 8 labor
  categories skilled paid male, skilled unpaid
  male, unskilled paid male, unskilled unpaid male,
  skilled paid female, skilled unpaid female,
  unskilled paid female, and unskilled unpaid
  female.

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Ex-ante analysis the case of Kenya (cont.)

• The model is a recursive dynamic CGE model built
  on a base SAM for the year 2003. The SAM will
  includes 8 labor categories, 40 household types
  classified by quintile, gender and areas, two
  trade partners (European Union and the Rest of
  the World), and government fiscal policies.
• The model will provide a simulation laboratory
  for doing controlled experiments - changing trade
  policies and other exogenous conditions such as
  government taxes, and measuring the impact of
  these changes on the structure of production and
  trade, and distribution of income among
  households. Simulation results will provide
  policy makers guidelines for long term planning.

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Ex-ante analysis the case of Kenya (cont.)

• The trade policies to be analyzed include, the
  conclusion of the Free Trade Agreement with the
  European Union.
• The nature of the simulations will be based on
  those identified in the World Banks document
  (2004).
• Complementary policies compensating losers from
  trade liberalization will also be simulated.

26
Ex-post analysis the Tunisian case study (work
in progress)

• Tunisia started its economic reform with the
  application of the structural adjustment program
  since 1986.
• The conclusion of the Uruguay agreement in 1995
  represented the most important step of trade
  liberalization in Tunisia where Non-tariff
  barriers are removed and tariff rates are bound.
• The partnership agreement signed with the
  European Union and implemented over a twelve
  years period (1996-2008) represents another major
  change in the Tunisian trade policy. Currently,
  almost all industrial products imported from
  Europe are duty free.
• Since 1996, many other preferential trade
  agreements are signed and being implemented by
  Tunisia (EFTA, GAFTA, AGADIR)

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Ex-post analysis the Tunisian case study (cont.)

• The first step in assessing the effects of trade
  liberalization on gender in Tunisia consists of
  calculating some relevant indicators such as
• 1.trends in the share of female workers to total
  labor force in the economy,
• 2. share of female to total workers in some key
  sectors,
• 3. average female-wage by type compared to male
• The estimation of these indicators should covers
  both the pre-trade phase (1985-1995) and the
  post-trade phase (1996-2008)
• If some changes are observed between the two
  periods in term of employment and wage by gender,
  the second step in assessing the role of trade
  liberalization in these changes should be carried
  out the econometric analysis.

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Ex-post analysis the Tunisian case study (cont.)

• Two steps form the econometric analysis in order
  to identify whether or not conditional gender
  wage gaps changed as Tunisia opened its economy
  to international competition.
• In the first step, a Mincer earnings equation
  will be estimated to explain the log wages of men
  and women and the residuals are preserved.
• The difference between the average male and
  female residual log wages in each economic
  activity in the sample is calculated, thereby
  omitting observable productivity
  characteristics..

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Ex-post analysis the Tunisian case study (cont.)

• In the second step, this residual will be used as
  the dependent variable in an OLS equation that
  controls for changes over time, industry
  concentration, and exposure to trade openness.
• For employment gap, the same approach will be
  followed with employment gap as dependent
  variable in an OLS equation.
• Finally, the two estimated OLS equations will be
  used to make forecasts on the expected changes in
  gender employment and wage as result of more
  integration of Tunisia in the word economy in the
  form of a potential conclusion of Doha Round and
  a deeper integration with the European Union in
  the forms of free trade of agricultural and
  services