Does giving cash to females help economic growth? Recap of an academic paper

We know that when women have money, they spend more of it on their children than men do. At least the evidence would suggest that. A new paper from Northwestern University explores whether or not that means that putting money on women’s hands will spur economic growth (and not just child welfare).

Female empowerment as a development policy seems pretty straightforward. Improving access to health care, education, or job opportunities for women is not controversial (in the Development world). Reducing any of these discriminations is both desirable and necessary in itself. This paper doesn’t dispute that. The two authors (one male, one female) set out to examine whether economic policies that exclusively benefit females can be justified on economic growth grounds. So when the World Bank offers a $100 million credit line for women, and men are excluded from cash-transfer and microcredit programs, is that helping economic growth?

Well, it depends, according to the authors. And the reasons, I think, have more to do with the problems of how we measure economic growth than with the outcomes of giving cash to women. Basically, if you live in a really poor country, giving money to women (who in turn invest in their children) isn’t going to do a lot for measurable economic growth because most growth is not in human capital (i.e. growth is not a result of new skills, technology). Growth in underdeveloped countries takes place mostly in physical capital (i.e. what you produce). In this way, in a really poor country, if a woman decides to spend money on educating her child, it is money that is not given to the child later in life (as cows, as a house with a tin roof, or just cash), and the latter is much more valuable. In a more developed country, where human capital is the driver of economic growth, meaning technological advances due to new ideas etc, giving money to women IS a driver of economic growth.

The paper goes on to argue that evidence shows men use money for investment more than women (I guess investing in your kids doesn’t count). The main gist of the paper really comes down to their assumption that we all have the same preferences and desires, men and women, and therefore taking money from men and giving it to women doesn’t make sense in really poor countries. I’m not entirely sure I buy it. They also show why it doesn’t make sense in highly developed societies because by that time, men and women largely earn the same amount, so any transfers from men to women would be more harmful (so all those developed countries where women make the same as men, er um, just Denmark maybe). So according to the paper, only in countries that are driven by human capital growth and women are still discriminated against will this lead to economic growth.

Again, this paper isn’t arguing that investing in women’s empowerment is a bad idea. They only want to show if it is grounded in economic growth theory. I guess you could say the paper is more of an indictment on the lack of opportunities in the poorest countries, where you’re better off buying a cow than sending your kid to school.

 

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