Economic benefits of gender equality in the European Union : literature review : existing evidence and methodological approaches.
Date: 2017-05-22
Institutions: European Institute for Gender Equality
Subjects: EU Member State, anti-discriminatory measure, economic consequence, equal pay, equal treatment, gender equality, position of women, report

Economic benefits 
of gender equality 
in the European Union

Literature review: existing evidence 
and methodological approaches

Acknowledgement

The present report is part of the work of the European Institute for Gender Equality (EIGE) on the economic benefits of 
gender equality in the European Union (EU). The study was commissioned by EIGE and carried out by ICF, Cambridge 
Econometrics and Collegio Carlo Alberto. The project was managed by the gender mainstreaming team of EIGE: Helena 
Morais Maceira and Barbara Limanowska with the support of Dimitrios Tsoutsias. 

The authors of this report include Claudia Villosio, Maria Laura Di Tommaso, Elena Grinza, Maria Cristina Rossi, Daniela 
Piazzalunga (Collegio Carlo Alberto), Katerina Mantouvalou and Jakub Caisl (ICF). 

The authors of the Annex include Claudia Villosio, Elena Grinza, Daniela Piazzalunga (Collegio Carlo Alberto), Katerina 
Mantouvalou, Jakub Caisl (ICF) and Ana Gonzalez-Martinez (Cambridge Econometrics ). 

EIGE would like to thank Dr Ewa Rumińska-Zimny (EIGE’s Expert’s Forum member, Poland), Dr David Cuberes (Clark University) 
and Dr Irene Riobóo Lestón (Universidad Rey Juan Carlos) for insights and expertise that greatly informed the research.

Important contributions were also made by, in alphabetical order: Priya Alvarez, Ludovica Anedda, Monika Bystrzycka, 
Dr  Paula  Franklin,  Bernadette  Gemmell,  Rosa  Heimer,  Barbara  Limanowska,  Dr  Anna  Rita  Manca,  Mira  Marjanovic, 
Helena Morais Maceira, Merle Paats, Dr Jolanta Reingardė and Dimitrios Tsoutsias. A particular thank you goes to other 
colleagues at the European Institute for Gender Equality for their intellectual contributions, administrative support and 
encouragement.

More about the study: http://eige.europa.eu

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Economic benefits of gender equality 
in the European Union

Literature review: existing evidence 
and methodological approaches

The European Institute for Gender Equality is an autonomous body of the European Union, established to 
contribute to and strengthen the promotion of gender equality, including gender mainstreaming in all EU 
policies and the resulting national policies, and the fight against discrimination based on sex, as well as to 
raise EU citizens’ awareness of gender equality.

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Foreword 

Gender equality is one of the founding pillars of the European 
Union and much progress has been made over the years to 
improve the everyday lives of women and men, especially with 
the creation of more equal opportunities. EIGE’s Gender Equal-
ity Index demonstrates a positive trend of development in the 
domain of employment, reflecting the EU’s focus on economic 
and labour market policy. However, large gender gaps persist 
when comparing educational attainment, pay and income, la-
bour  market  activity  rates  and  the  provision  of  unpaid  work 
and distribution of time between women and men. 

Lower wages and employment prospects for women also in-
crease their risk of poverty or social exclusion, especially later 
in life when they are dependent on a pension that relies on 
previous earnings. When it comes to education, women are 
largely  missing  from  STEM  (Science, Technology,  Engineer-
ing and Mathematics) fields, which have promising job pros-
pects at present and in the future. In short, women’s talents 
are not being used to the full, which is putting a strain on 
individuals, employers and the society at large.

The  European  Institute  for  Gender  Equality  has  produced 
sound  evidence  that  confirms  improvements  to  gender 
equality will generate economic growth for the EU and bene-
fit individuals and society at large. We looked at the economic 
impacts of reducing gender inequalities in STEM education, 
labour market activity and pay. We also considered the demo-
graphic changes when these gender gaps are reduced and a 
more equal distribution of unpaid care work is achieved. 

Our findings prove that more gender equality boosts eco-
nomic growth. The evidence confirms that improvements 
to gender equality would generate more jobs for the EU – 
up to 10.5 million additional jobs by 2050. Gross Domestic 
Product  (GDP)  per  capita  would  also  be  positively  affect-
ed and could increase up to nearly 10% by 2050. Another 
important finding shows that addressing different gender 
inequalities together is likely to generate more positive im-
pacts, rather than tackling them one by one in isolation.

From a methodological point of view, this study is unique 
in the EU context. It is the first of its kind to use a robust 
econometric model (E3ME macroeconomic model) to esti-
mate the macroeconomic benefits of gender equality in a 
broad range of policy areas. 

The study shows that promoting gender equality and main-
streaming  the  different  perspectives  of  women  and  men 
into the policy areas of education, labour market participa-
tion and pay, among others is essential not only for reasons 
of social justice and fairness but it is also essential for smart, 
sustainable  and  inclusive  growth.  Structural  changes  are 
necessary  to  avoid  permanent  losses  in  wealth  and  slug-
gish growth rates and to put the European economy back 
on an upward sustainable growth path.

On behalf of the Institute and its team, I would like to thank 
all the experts, researchers and my colleagues at EIGE who 
contributed to this publication. 

Virginija Langbakk
Director
The European Institute  
for Gender Equality (EIGE)

Economic benefits of gender equality in the European Union

3

EIGE 
Contents

Foreword  

Introduction 

1. 

Summary of the literature review 

1.1. 

Introduction 

1.2.  Theoretical approaches: mainstream economics and alternatives 

1.3.  Empirical studies 

1.4.  Methods used in the empirical literature 

2. 

The economic benefits of gender equality in different policy areas 

2.1.  The economic benefits of gender equality in education 

2.2.  The economic benefits of gender equality in labour market participation 

2.3.  The economic benefits of reducing the gender earnings gap 

2.4.  Gender equality, social reproduction and unpaid care work 

2.5.  The economic effects of women’s leadership in firms 

2.6.  The economic benefits of women in politics 

2.7.  The economic benefits of ending violence against women 

2.8.  The impact of health on economic outcomes 

References 

3. 

Annex: Selected methodological approaches 

3.1.   Methodological example 1: Labour market — Participation 

3.2.   Methodological example 2: Labour market — Participation, self-employment and entrepreneurship 

3.3.   Methodological example 3: Labour market — Participation 

3.4.   Methodological example 4: Economic decision-making — Leadership 

3.5.   Methodological example 5: Economic decision-making — Leadership  

3

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10

11

11

13

14

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Economic benefits of gender equality in the European Union

5

EIGEEIGE 
Introduction

Introduction

In  2015-2016,  the  European  Institute  for  Gender  Equality 
commissioned  research  to  assess  how  improvements  in 
gender  equality  can  contribute  to  sustainable,  inclusive 
and smart economic growth of the EU. This study is unique 
in the EU context, as it uses a robust econometric model to 
estimate economic impacts of improved gender equality in 
several broad areas such as education, labour market activ-
ity and wages. It also considers the demographic impact of 
such improvements. There has been no previous study that 
attempted econometric modelling of such a broad range 
of potential impacts of improved gender equality in the EU.

Main findings of the study

Gender equality and equal opportunities in the labour mar-
ket have improved over recent decades as a result of legis-
lative,  social  and  cultural  changes  towards  women  in  the 
labour force. However, there are still large persistent gender 
gaps  between  women  and  men  when  comparing  their 
educational  attainment,  income  and  wage  rates,  labour 
market activity rates and provision of unpaid care work and 
distribution of time.

The  results  of  the  modelling  (1)  show  that  encouraging 
more active participation of women in the labour market 
and increasing their attainment in STEM (Science, Technol-
ogy, Engineering and Mathematics) education would have 
a largely positive effect on GDP per capita and on employ-
ment  of  women.  The  positive  impacts  are  due  to  an  in-
crease in productivity and an improvement to the potential 
productive capacity of the economy.

In sum, the study results show that higher gender equality 
would lead to a large increase in the number of jobs that 
would benefit both women and men. There would be up 
to 10.5 million additional jobs in 2050 due to improvements 
in gender equality, with about 70 % of these jobs taken by 
women.  The  study  further  shows  that  improving  gender 
equality  has  strong,  positive  GDP  per  capita  impacts  that 
grow over time. The results show a positive impact of gen-
der  equality  measures  on  economic  growth  due  to  more 
women in STEM education, higher labour market participa-
tion of women and a lower gender pay gap.

(1) 

For  a  full  description  of  the  study  results,  please  see  European 
Institute  for  Gender  Equality  (EIGE)  (2017),  Economic  Benefits  of 
Gender  Equality  in  the  European  Union:  Report  on  the  empirical 
application  of  the  model,  available  at  http://eige.europa.eu/sites/
default/files/documents/mh0217174enn_web.pdf

Introduction

The study demonstrates that there is a clear need to intro-
duce gender equality measures as soon as possible, in the 
key  policy  areas  of  education  and  employment,  in  order 
to  achieve  sustainable  socio-economic  development  and 
growth. The  study  forecasts  an  improvement  on  employ-
ment rates as early as 2020, and the strongest impact on 
labour market participation and GDP per capita across the 
EU in the medium (2030) and long term (2050).

The GDP impacts of gender equality policies compare well 
against  impacts  of  other  labour  market  and  education 
policies,  making  gender  equality  a  highly  relevant  policy 
measure to promote economic growth. Moreover, the re-
sults also show that increased gender equality will help to 
improve employment, address productivity challenges and 
population ageing issues in the EU.

Putting gender equality at the heart of the follow-up strat-
egy of Europe 2020 and other policy reforms, such as the 
European Pillar of Social Rights, would make the economic 
system inclusive, enabling women to fulfil their full poten-
tial, and hence benefiting women and the whole society. 
This would enable the EU to achieve smart, sustainable and 
inclusive economic growth.

Higher gender equality would lead to:

 ■ Between 6.3 million and 10.5 million additional jobs 
in  2050  due  to  improvements  in  gender  equality 
by  addressing  gender  segregation  in  educational 
choices and increasing the participation of women in 
STEM, with about 70 % of these jobs taken by women.

 ■ An  increase  in  employment  productivity  and  in 
the potential productive capacity of the economy 
as a result of addressing the under-representation 
of women in sectors with skill shortages and good 
employment prospects such as STEM.

 ■ Positive  GDP  per  capita  impacts  that  grow  over 
time. Improving gender equality would contribute 
to an increase in GDP per capita of up to 9.6 % in 
2050 in the EU.

 ■ Individual  gains  up  to  12  %  increase  in  GDP  per 
capita  by  2050  in  EU  Member  States  with  lower 
gender  equality  (2)  if  gender  equality  measures 
were implemented.

(2) 

Based on current levels of gender equality as measured by EIGE’s 
Gender Equality Index.

Economic benefits of gender equality in the European Union

7

EIGEEIGEIntroduction

Resources resulting from the study

Besides the present publication, the outputs of this study 
include eight additional publications, the content of which 
is summarised below:

The outputs of the study include nine publications:

1.  Literature  review:  existing  evidence  on  the  social  and 
economic benefits of gender equality and methodological 
approaches

2. EU and EU Member States overviews

3. Report on the empirical application of the model

equality.  In  this  first  part,  the  review  includes  sections 
on  theoretical  studies  focusing  on  the  analysis  on  the 
contribution of gender equality to economic growth. The 
summary  further  includes  a  few  empirical  studies  that 
attempt to quantify the causal effect of different forms of 
gender inequalities on the economic growth.

In  the  second  part,  the  publication  includes  a  review  of 
studies  that  analyse  the  economic  benefits  of  gender 
equality in different policy areas, including:

 ■ gender equality in education;

 ■ gender equality in labour market participation;

 ■ reducing gender earnings gap;

4. How the evidence was produced: briefing paper on the 
theoretical framework and model

 ■ women’s leadership in firms;

5. How the evidence was produced: factsheet on the theor-
etical framework and model

 ■ women in politics;

6.  Economic  impacts  of  gender  equality  in  the  EU  policy 
context: briefing paper

7. Economic impacts of gender equality: briefing paper

8.  How  gender  equality  in  STEM  education  leads  to  eco-
nomic growth: briefing paper

9. How closing the gender labour market activity and pay 
gap leads to economic growth: briefing paper

This  publication  includes  a  summary  of  the  literature  on 
gender equality reviewed at EU and Member State levels. 
The  review  can  be  divided  into  three  parts,  whereby  the 
first part includes research studies that either theoretically 
or  empirically  examine  the  economic  impact  of  gender 

 ■ ending violence against women.

Further sections analyse literature on gender equality, social 
reproduction and care and unpaid work, as well as on the 
impact of health inequalities on economic outcomes.

Building  on  the  results  of  the  literature  review  at  EU 
and  Member  State  levels  the  study  team  selected  five 
methodological  examples  to  be  reviewed  more  indepth 
and explored how they compare to the E3ME model and 
can  inform  the  subsequent  phases  of  the  study.  A  short 
list  of  examples  was  developed  based  on  several  criteria 
focusing  on  added  value  in  terms  of  methodology  and 
learning  effects. The  selected  examples  were  analysed  in 
depth and the findings were presented in a standardised 
template.  This  analysis  is  published  as  an  annex  to  the 
summary of the literature review.

8

Economic benefits of gender equality in the European Union

1. 
Summary of the 
literature review

1.1. 

Introduction

Gender  equality  is  explicitly  recognised  as  a  human  right 
and a prerequisite for human development (3).

Promoting gender equality is necessary not only for reasons 
of social justice and fairness; it also represents an economic 
necessity  for  achieving  efficiency  and  growth.  As  clearly 
addressed  by  UN  Secretary  General  Ban  Ki  Moon  at  the 
commemoration  of  the  2008  International Women’s  Day: 
‘Investing in women is not only the right thing to do. It is the 
smart thing to do. I am deeply convinced that, in women, 
the world has at its disposal, the most significant and yet 
largely  untapped  potential  for  development  and  peace. 
Gender equality is not only a goal in itself, but a prerequisite 
for reaching all the other international development goals, 
including the Millennium Development Goals’ (4).

There  is  an  increasing  consensus  on  expanding  the  per-
ception  of  gender  equality  from  being  only  a  social  goal 
to a wider one including economic aspects. Consequently, 
the debate about the potential benefits of gender equality 
has  broadened  and  incorporated  the  potential  economic 
implications of gender equality. As stated by former Com-
missioner  Viviane  Reding, ‘the  economic  case  for  getting 
more  women  into  the  workforce  and  more  women  into 
top jobs in the EU is overwhelming … We can only reach 
our  economic  and  employment  goals  by  making  full  use 
of  all  our  human  resources  —  both  in  the  labour  market 
as a whole and at the top. This is an essential part of our 
economic recovery plans’ (5).

Bettio  and  Smith  (2008)  assert  that  the  ‘Economic  Case’, 
which stresses the impact of gender quality on growth, has 
to be seen as a step further on from the so-called ‘Business 
Case’ for gender equality. The latter relates to the firm level 
and emphasises the benefits for employers and managers, 
which stem from granting equal treatment to employees 
and  a  more  gender-balanced  workforce.  The  ‘Economic 
Case’  for  gender  equality  in  turn  highlights  the  potential 
benefits  of  increasing  gender  equality  which  go  beyond 
the micro level (individual firms and workers) and material-
ise at the macro level (wider economy).

(3) 
(4) 
(5) 

Beijing Conference of 1995.
Quoted in Kabeer and Natali (2013).
European Commission, Progress in gender equality leads to economic 
growth,  says  European  Commission  report  (press  release),  2012, 
available  at:  http://europa.eu/rapid/press-release_IP-12-371_en.ht 
m?locale=en

1. Summary of the literature review

1.2.  Theoretical approaches: mainstream 

economics and alternatives

The  analysis  of  the  link  between  gender  equality  and 
economic growth is part of a wider renewed interest in the 
theor etical  and  empirical  analysis  on  economic  growth. 
However, in this strand of literature there are comparatively 
few studies that explicitly consider the role of gender equality 
in  connection  with  economic  growth  (Klasen,  1999).  The 
literature on the link between economic growth and gender 
equality  can  be  divided  into  two  main  groups:  the  analysis 
on the contribution of gender equality to economic growth, 
and the reverse analysis of the effect of economic growth on 
gender equality. For the purpose of this project, we will focus 
on the first group of studies (6), i.e. those studies that extend 
the focus from gender equality as a human right and a social 
goal to gender equality as an ingredient of economic growth.

Most  of  the  existing  economic  literature  on  the  link 
between  gender  equality  and  growth  is  rooted  in  the 
standard  economic  theoretical  frameworks  based  on 
rational  individual  choices  and  market  equilibrium.  Gross 
domestic product (GDP) per capita is the most commonly 
chosen measure of economic growth.

Yet, this theoretical economic framework has been criticised 
for being too narrow when analysing countries’ development 
and growth and the link between gender-related aspects and 
growth. One critique lies in the choice of GDP for measuring 
societies’  growth,  and  argues  for  the  use  of  more  gender-
sensitive measures able to encompass a wider definition of 
economic  progress  (Bettio  and  Mark,  2008).  GDP  does  not 
include household work (domestic tasks such as cooking and 
cleaning,  child  rearing  and  other  care  responsibilities,  etc.), 
an  area  where  women  play  a  predominant  role.  According 
to  the  latest  Eurofound  data,  women  spend  an  average  of 
26  hours  on  caring  activities,  compared  with  the  9  hours 
spent by men. Even though men devote more time to paid 
work (41 hours, compared with 34 hours spent by women), 
when  considering  both  paid  and  unpaid  work,  data  show 
that women work longer hours than men: 64 hours a week 
compared to the 53 hours worked by men.

It is thus arguably important to provide a monetary value 
to  unpaid  work.  Marilyn  Waring’s  seminal  and  influential 
work  If  women  counted:  a  new  feminist  economics  (1989) 
helped  pioneer  the  feminist  critique  of  mainstream  eco-
nomics for ignoring the unpaid work that women do, even 
though this is essential for sustaining economies. The book 
explored what would have to change in economic statistics 
and economic policy to make what women do really count.

(6) 

Reviews  of  the  literature  on  the  link  between  economic  growth 
and gender equality, with causality going from economic growth 
to  gender  equality,  can  be  found  in  Cuberes  and Teignier-Baqué 
(2011, 2014) and in Kabeer and Natali (2013).

Economic benefits of gender equality in the European Union 11

EIGEEIGE1. Summary of the literature review

Many efforts have been made since to include unpaid work 
in national accounts statistics and in GDP. Goldschmidt-Cler-
mont (1982) was the first study that focused on the evalu-
ation methodology of unpaid household work. The author 
considers  unpaid  work  evaluations  based  on  volumes  of 
inputs  or  outputs.  Input  evaluation  is  based  either  on  the 
opportunity cost of the time spent in unpaid work i.e. the in-
dividual hourly wage or considering the market alternative’s 
cost.  Output  evaluation  requires  the  identification  of  the 
market goods and services equivalent to the ones produced 
at home (Antonopoulos, 2009). More recent studies on Or-
ganisation  for  Economic  Cooperation  and  Development 
(OECD) countries show that between one third and half of 
all  valuable  economic  activity  is  not  accounted  for  in  the 
traditional measures of well-being, such as GDP per capita 
(Miranda, 2011). In all OECD countries, women do more un-
paid work than men and, at an aggregated level, they do less 
market work. While unpaid work — and especially the gen-
der division of unpaid work — is to some extent related to 
a country’s development level, country cross-sectional data 
suggest that demographic factors and public policies tend 
to exercise a much larger impact (OECD, 2009, OECD, 2011).

One of the first economic analyses of the allocation of time 
between genders within the household dates back to Beck-
er (1965). Becker used the idea of comparative advantage to 
argue that the traditional division of labour within the house-
hold is efficient due to women’s lower wages in the labour 
market and biological advantage in childcare. Moving from 
these first theoretical approaches, subsequent works, in par-
ticular  the  extended  and  reproductive  macroeconomic 
approach developed  by  Picchio  (1992), have  attempted  to 
include  household  production  in  economic  analyses.  This 
approach includes the process of social reproduction among 
the  structural  processes  of  production,  distribution  and  ex-
change. It explicitly acknowledges the importance of unpaid 
domestic and care work for the reproduction of societies.

In  the  classical  approach  of  demand  and  supply,  labour  is 
seen  as  a  commodity  and  thus  has  a  price.  However,  the 
process behind the creation of labour cannot be disentan-
gled from the labour force. What makes labour different from 
other commodities is the reproduction cost, which is ruled 
out by the traditional demand and supply mechanism. The 
reproduction value of labour is intertwined with every com-
modity: in fact, no commodity could have been produced 
without labour, which in turn, needs wage to produce com-
modities. The process of production and the process of re-
production of labour are therefore intertwined.

Secondly,  the  aggregate  measure  of  GDP  ignores  the  differ-
ences between women and men and their unequal living con-
ditions. In this context, a very useful framework is Sen’s cap­
abilities approach (Sen, 1985, 1992, 1999, 2009), which shifts 

12

Economic benefits of gender equality in the European Union

the  focus  from  gender  equality  as  equality  in  resources  and 
means to gender equality as equality of opportunities in the 
well­being  domain. This  approach  recognises  that  well-be-
ing is a multidimensional concept, and that it cannot be as-
sumed that all women and men access and use resources in 
the same way. Sen underlines that the welfare of individuals 
and societies should not be measured by income, expenditure 
or consumption, but that it should be based on capabilities. 
He distinguishes between functionings and capabilities. Func-
tionings are beings and doings. For instance, to have a job, to 
be fed or to have an education are considered as functionings. 
Capabilities are instead notions of freedom (they can be com-
pared to opportunity sets), and they represent all the poten-
tial functionings an individual can choose from. Sen’s work is 
the basis of the Human Development Index (United Nations 
Development Programme (UNDP), 2015) and the basis of the 
report by the Commission on the Measurement of Economic 
Performance and Social Progress (Stiglitz et al., 2008), generally 
referred to as the Stiglitz-Sen-Fitoussi Commission (7).

Another  shortcoming  of  the  economic  literature,  which 
arises  when  gender  equality  aspects  are  analysed,  is  the 
notion  of  the ‘Rational  Economic  Man’.  Neoclassical  eco-
nomic theory is in fact based on the behaviours of rational, 
representative male agents with their own preferences and 
tastes that do not depend on external circumstances. This 
concept is, however, very difficult to apply to women with 
children or caring roles (Bettio and Smith, 2008). In fact, as 
Duncan and Edwards (1997) have pointed out, economic 
rationality may be determined by non-market criteria about 
what is socially right, and may be influenced and changed 
by the context in which women and men find themselves. 
They thus argue that preferences and tastes are collective 
and gendered, rather than individual and gender-free, and 
introduce the concept of ‘gendered moral rationality’.

Similarly,  the  concept  of  the  household  as  a  unique  entity 
where decisions are taken consensually has been criticised by 
the so-called ‘household bargaining approach’. This approach, 
developed in particular by Chiappori’s collective models (1988 
and 1997), considers that decisions are taken within a ‘non-uni-
tary’  framework.  Thus,  specialisation  between  a  household’s 
components  may  be  a  risky  strategy  in  case  of  unexpected 
events (e.g. divorce, premature death). The limits of the ‘unitary’ 
household  model  are  not  only  apparent  in  the  area  of  aca-
demic research, but are also clear from a policy point of view. 
Assuming a unitary model, resources may be directed to only 

(7) 

The  Stiglitz-Sen-Fitoussi  Commission  is  a  commission  of  inquiry 
created by the French government in 2008. The inquiry examined 
how the wealth and social progress of a nation could be measured, 
without relying on the unidirectional GDP measure. The commission 
was formed in February 2008 and Joseph E. Stiglitz was named as 
the chair. Amartya Sen was the economic adviser and the French 
economist Jean-Paul Fitoussi was the coordinator.

1. Summary of the literature review

(male)  household  heads,  ignoring  intra-household  inequality. 
The  household  bargaining  approach  tries  to  incorporate  the 
social  reality  of  the  family,  proposing  different  alternatives  to 
possible  interactions  within  the  household.  Within  this  ap-
proach, a range of alternative models, mostly based on game 
theory, are used to describe intra-household dynamics: cooper-
ative, non-cooperative, collective, mixed. However, agreement 
on what kind of interactions are prevalent in the household has 
not yet been reached, although there is a wide consensus on 
the fact that intra-household interactions are characterised by 
elements of both cooperation and conflict (Agarwal, 1997) (8).

Finally, the static view of households with preferences fixed in 
time has been questioned by ‘life-course approach’ propon-
ents.  They  stress  that  it  is  necessary  to  bring  to  light  the 
changes of interests and preferences over time and the inter-
actions of the group of individuals that comprise a household 
(Ketzer, 1986, 1991). This aspect is particularly true when con-
sidering  gender  inequalities  affected  by  life-course  events 
such as family formation, separations and ageing.

1.3.  Empirical studies

On the empirical front, there are some studies that attempt 
to  quantify  the  causal  effect  of  different  forms  of  gender 
inequalities on economic growth. However, as pointed out 
by Cuberes and Teignier (2013), the empirical literature in 
this field is not well connected to the existing theoretical 
frameworks,  because  these  frameworks  are  not  easy  to 
translate into an empirical investigation.

Empirical studies may be categorised according to whether 
they seek a direct or indirect effect of gender equality on 
economic outputs. The direct effect derives from the bet-
ter use of the human resources of the economy. If skills and 
abilities are equally distributed among genders, the failure 
to  make  full  use  of  women’s  ability  and  talent  represents 
a  waste  of  the  human  capital  potential  of  the  economy, 
lowering  average  productivity  and  growth. These  studies, 
which  have  benefited  from  the  recent  development  of 
cross-country  international  data  sets,  mainly  analyse  the 
impact of gender inequalities on macroeconomic outputs 
and  in  some  cases  try  to  quantify  the  cost  of  gender  in-
equality, or conversely, gains in terms of economic output 
that could be achieved in the case of gender equality.

Although acknowledging its limitations, the existing empir-
ical literature typically chooses changes in GDP per capita 
(or other macroeconomic variables such as investment, (un)
employment,  etc.)  as  the  main  indicator  of  the  economic 

(8) 

For a further elaboration on this concept, see sections 2.3 and 2.4 
on the wage gap and unpaid work.

outcomes of changes in gender equality. This relates to the 
fact  that  GDP  is  a  widely  used  and  harmonised  measure 
that allows for easy cross-country comparisons — there is 
no other alternative for measuring economic progress that 
would be so widely accepted (9).

The  second  strand  of  existing  empirical  studies  focuses  on 
the indirect economic effect of gender inequality. It relates 
to  the  positive  externalities  generated  by  greater  gender 
equality  on  household  decisions,  including  fertility,  higher 
educational attainment of children, and allocation of house-
hold income. Such studies explore the potential link between 
the gender gap and variables that may have an effect on eco-
nomic growth. They are mainly empirical studies on the caus-
es and consequences of different aspects of gender inequal-
ity in a specific country. As they are mainly country-specific, 
extrapolating  their  results  to  wider  policy  implications  may 
often be inadequate (Bandiera and Natraj, 2013).

Education and the labour market are the two main areas 
where greater gender equality is likely to impact economic 
outputs through many different channels.

In the first case, studies have focused on the gender gap in 
education and the gains that a reduction in such a gap could 
bring to the economy. Scholars have particularly analysed the 
role that increasing women’s and girls’ educational attainment 
can have on developing countries’ growth. However, the posi-
tive effects of reducing the gender gap in education have also 
been  found  in  developed  countries,  although  they  are  typ-
ically smaller. For instance, despite the fact that women’s per-
formance and participation in tertiary education exceeds that 
of men in most EU Member States, considerable gender in-
equalities are still identified in research. Women are less likely to 
choose STEM fields of study at graduate and postgraduate level, 
resulting  in  lower  employment  prospects  and  lower  wages.

The second main channel works by reducing gender inequal-
ity in labour market outcomes. Here, the three main aspects 
that have been investigated are: (i) the increase in women’s la­
bour market participation; (ii) the role of the gender wage 
gap; and (iii) gender equality in economic decision­making.

Other  existing  researched  pathways  include  the  benefits 
of a more equal sharing of social reproduction, the em­
powerment of women in political and economic deci­
sion­making, and the costs for societies of the gender gap 
in health and gender­based violence.

(9) 

There  are  few  examples  that  attempt  to  integrate  unpaid  work 
into  neoclassical  economic  models  and  analyses.  Picchio  (2003) 
introduces the concept of total work, i.e. the sum of paid and unpaid 
work,  and  extended  income,  i.e.  the  sum  of  money  income  and 
services derived from unpaid work, to bring out crucial differences 
between women and men in the family and in the market.

Economic benefits of gender equality in the European Union 13

EIGE1. Summary of the literature review

1.4.  Methods used in the empirical 

literature

1.4.1.  Regressions analysis

The most commonly used tool for the estimation of the causal 
direct  economic  effect  of  gender  (in)equality  is  regression 
analysis 
(cross-section,  panel  data,  or  both).  Typically, 
(variations in) countries’ growth rates of per capita income are 
regressed on a set of standard growth variables that include 
(variations in) different measures of gender inequality.

This estimation can be interpreted as causal effects of gen-
der equality on economic outputs if a number of method-
ological aspects are correctly addressed.

First of all, the variation in gender equality must be exogen-
ous to the analysed economic output. This might not occur 
in case of reverse causality i.e. when gender equality is gen-
erated by economic growth, or because gender equality is 
correlated with other factors that affect economic growth 
(spurious correlation) which are not included in the analysis.

A  second  possible  limitation  of  regression  analysis  relates 
to the possibility of extending the validity of a result in one 
context (country, period of time) to other samples. The issue 
of  external  validity  arises  when  the  analysis  fails  to  detect 
the  mechanism  through  which  gender  gaps  affect  eco-
nomic growth. In this case, the extrapolation of results from 
the analysed situation to other settings may not be valid.

Furthermore, constraints in the availability of data may gen-
erate measurement errors or the impossibility of adequate 
controls for composition and selection effects (10).

Most of these shortcomings have been addressed by the 
literature,  which  has  also  proposed  a  range  of  possible 
solutions.  A  summary  of  possible  strategies  to  overcome 
regression analysis biases, together with the limits in their 
implementation, is presented in the table below (Table 1.1).

1.4.2.  Macro modelling approaches

The complexity of studying a multidimensional phenomenon 
such as gender equality led to the development and imple-
mentation of modelling approaches in which some patterns 
that are identified at micro level are translated into a macro-
economic framework. This approach makes it possible to take 
into account the effects of improving gender equality on the 

(10) 

For instance, Mulligan and Rubinstein (2008) have shown that the 
major  reason  for  the  growth  in  women’s  measured  hourly  wages 
relative  to  men’s  from  the  late  1970s  through  to  the  late  1990s 
was  women’s  selection  into  the  labour  force,  their  labour  force 
attachment, and their human capital investment.

14

Economic benefits of gender equality in the European Union

economy, along with other elements that are related to the 
behaviour of individual agents at microeconomic level such 
as educational choices, entry in the labour market, and house-
hold formation. There are different modelling approaches that 
offer alternative interpretations of how the economy operates: 
dynamic micro-simulation models in which each individual in 
a given initial population is evolved through time according 
to estimated transition probabilities; Computational General 
Equilibrium  (CGE)  models  that  are  more  theoretical  and  as-
sume optimising behaviour among all economic agents; and 
macro-econometric  modelling  that  is  more  empirical  in  na-
ture and assumes a continuation of past trends in behaviour.

An example of the use of the macro modelling approach ap-
plied to the gender equality field is the work of Rosetti and 
Kakande (2010), where a CGE model is used to quantify the 
contribution of reduced gender inequality in Uganda to GDP 
growth rates. The study analyses the potential increase in the 
GDP growth rate by (i) increasing the labour participation of 
women in more productive activities; (ii) increasing the skills of 
women; (iii) increasing the productivity of labour provided by 
women; (iv) increasing the productivity of activities in which 
women  are  engaged;  and  (v)  increasing  women’s  access  to 
land. The study confirms the importance of reducing gender 
inequalities that limit women’s potential to improve growth 
and the poverty reduction prospects of African economies.

1.4.3.  Basic assessments

Another approach which exists in the literature aiming at evalu-
ating the economic gains of higher gender equality in soci eties 
is the estimation of the effect of full gender equality in the labour 
market. This approach evaluates what happens if (all or some 
of ) the barriers to women’s participation in the labour market 
are  removed  and  women  can  participate  to  the  same  extent 
as men and on the same conditions (in terms of occupations, 
sectors, working conditions, career and productivity). The effect 
on  economic  growth  is  then  estimated  by  computing  the 
impact of the additional labour force in the economy.

This approach may represent a higher bound for the esti-
mation of the economic benefits of gender equality. How-
ever, it contains a number of assumptions that would need 
to be considered.

 ■ It is based on the hypothetical assumption of the re-
moval of any inequality in labour market access.

 ■

It implies a completely elastic demand (the economy is 
able to offer full employment to the additional labour 
supply).

 ■ It often computes the additional supply to the labour 
market while disengaging its gendered nature. In other 

1. Summary of the literature review

Table 1.1  Possible approaches to strengthen the robustness of regression analysis

Common biases arising in the 
regression analysis of economic 
impact of gender inequality

Example of possible solutions

Limitation

Presence of endogeneity because of 
reverse causality

Instrumental variables approach with 
tests for the validity of instruments 
chosen

Valid instrumental variables are diffi-
cult to find because many variables 
that predict gender equality are also 
correlated with economic outputs

Presence of endogeneity because of 
spurious correlations

Inclusion of all relevant variables in 
the analysis

Data sets may not contain relevant 
omitted variables

Misidentification of the channel 
through which gender gaps affect 
economic growth

System of equation to control for 
possible different channels; estima-
tion of a reduced form of an underly-
ing complex model

Measurement errors due to weak or 
incomparable data (mostly apply to 
developing countries’ data)

Use of comparable cross-country 
data; use of country fixed effects in 
estimations

Inadequate control for composition 
and selection effect

Lack of robustness checks

Multicollinearity

Use of adequate data; controls for 
the workforce composition in the 
estimation

Use of different measures of gender 
inequality acknowledging the pros 
and cons of each of them; careful 
treatment of outliers’ value

Careful choice of variables to be used 
in the regression; factor analysis; 
statistical tests

The coefficients may be hard to 
interpret

Availability of data

Availability of data

Availability of data/statistical 
feasibility

Lack of data/variables. In case of 
factor analysis (9): impossibility of dis-
entangling the impact of the specific 
observed variables since they are 
aggregated in ‘factors’. Low power of 
specific tests

words, the behaviour of women in the labour market is 
assumed to be equal to that of men. Consequently, an 
increase in women’s participation is considered to have 
the same effect as an increase in men’s participation.

1.4.4.  Evaluation of ‘natural experiments’

These  are  micro-level  studies  based  on  randomised  con-
trolled  trials  or  the  use  of  natural  and  field  experiments. 
Examples of studies of this type in Europe include, for in-
stance,  studies  on  the  effect  that  legally  imposed  gender 
quotas in companies’ board of directors have on firms’ per-
formance (see section 2.5 on economic decision-making).

On  the  one  hand,  these  studies  may  overcome  some  of 
the problems of regressions analysis, in particular those re-
lated to endogeneity. The introduction of the quota can in 

fact be seen as a ‘natural experiment’ so that an increase in 
board gender diversity can be seen as an exogenous event. 
On the other hand, they may raise different concerns when 
issues  relating  to  the  exact  timing  of  the ‘shock’  brought 
about  by  the  law  and  on  the  control  group  (similar  firms 
not affected by the shock) are not correctly addressed and 
taken into account (Ferreira, 2015). (11)

(11) 

In factor analysis, the factors represent unobserved latent variables 
that affect observed correlated variables.

Economic benefits of gender equality in the European Union 15

EIGE2. 
The economic 
benefits of gender 
equality in different 
policy areas

2. The economic benefits of gender equality in different policy areas

In what follows, we review the most relevant evidence for the 
impact of gender equality on different macroeconomic out-
comes, highlighting the most important channels through 
which greater gender equality is likely to affect growth.

This  review  aims  to  emphasise  those  studies  where  the 
evidence is more robust and informative for policymakers. To 
quote Cuberes and Teigner (2011), these are studies that can 
constitute ‘useful tools to answer clear-cut policy questions 
such as what would be the productivity benefit of making 
the  labour  market  more  accessible  and/or  fair  to  women’. 
Put differently, the studies reviewed here aim at helping us 
bridge the gap between policymaking and evidence, which 
is one of the objectives of the present study.

Below is a table summarising the indicators that have been 
used to measure the economic impact of increasing gender 

equality in different areas (i.e. education, labour market par-
ticipation,  gender  pay  gap,  distribution  of  unpaid  work, 
firms’ leadership positions, entrepreneurship positions, and 
political  decision-making)  as  well  as  the  main  evidence 
from  the  literature  on  the  economic  impact  of  increased 
gender equality. These are discussed in more depth in the 
subsequent sections.

Our review focuses on the micro and macroeconomic gains 
deriving from enhancing gender equality in the EU. Thus, it 
concentrates on those studies that have an economic var-
iable  as  the  main  outcome  of  increasing  gender  equality. 
However, promoting gender equality produces effects that 
extend  well  beyond  the  economic  effects  analysed  here. 
These  aspects  are  not  addressed  in  the  present  study,  as 
they are outside its scope and focus.

Table 2.1 

Summary table

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Fertility rate

Increasing 
gender  
equality in 
education

Per capita and total GDP 
growth rate

Labour productivity

NEGATIVE EFFECT/DECREASE
 ■ Existing evidence suggests that, especially in developing countries, an 

increase in female education reduces fertility (Barro and Lee, 1994; Brummet, 
2008; World Bank, 2011; Klassen, 2009)

NEGATIVE EFFECT/DECREASE (for female education)
 ■ Barro and Lee, 1994 found that female education was negatively correlated 
with economic growth. Barro and Lee attribute this to a sign of ‘backward-
ness’ in society, where gender differences may be picking up on issues within 
less developed countries that may not have been captured with an initial 
GDP variable

 ■ Lagerlöf, 2003 also found that increasing gender equality in education can 

lead to reduction in economic growth

POSITIVE EFFECT/INCREASE
 ■ Baliamoune, 2008 found that the gender gap in education has a negative 

effect on income growth. The study found out that the gender gap in educa-
tion has a stronger negative effect on growth in Arab countries

 ■ Brummet, 2008 identified a significant negative impact of the gender gap 
in education on growth. Similar evidence was provided by Klasen, 2009, 
who also found that gender gaps in education had a negative impact on 
economic growth. The regions with the largest gender gaps in education — 
South Asia, sub-Saharan Africa, and the MENA region — were found to 
incur the largest losses in terms of economic growth. For instance, the total 
combined effect (direct and indirect) in South Asia, sub-Saharan Africa and 
the MENA region was estimated respectively at a 1 %, 0.8 % and 0.7 % annual 
loss in per capita growth

POSITIVE/INCREASE
 ■ There is some evidence that female education has positive impacts on over-
all labour productivity, which is more pronounced than in the case of male 
education (Knowles, Lorgelly, Owen, 2002)

Economic benefits of gender equality in the European Union 17

EIGEEIGE2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Life expectancy/family  
and child health

Increasing 
gender  
equality in 
education

Investment

POSITIVE/INCREASE
 ■ The literature also identified other types of social benefits associated with 
decreases in gender gaps in education, such as reduced infant and child 
mortality, improvement in family and child health and increase in life ex-
pectancy (Barro and Lee, 1994; Schultz, 1988; Behrman and Deolalikar, 1988; 
Bellew, Raney and Subbarao, 1992; Subbarao and Raney, 1995)

POSITIVE/INCREASE
 ■ Klasen, 2009 found a positive and significant relationship between increased 

gender equality and education and investment

POSITIVE EFFECT/INCREASE
 ■ International level including EU level:

• 

• 

13 % higher GDP in the euro area, with the elimination of the gender 
employment gap (Daly, 2007);
27-29 % higher GDP for EU average with full gender balance on the 
labour market (Löfström, 2009);

•  higher GDP ranging from +3 % in Sweden to +19 % in Italy with increas-

ing women’s employment rate (Aguirre et al., 2012);

Increasing 
gender 
equality 
in labour 
market  
participa­
tion

Per capita and total GDP 
growth rate

•  higher GDP growth (+ 1.3 %) with improvement in equality of opportuni-
ties (measured by the following indicators: fertility rate, secondary enrol-
ment gap and literacy rate gap) and higher GDP growth (+ 1.19 %) with 
improvement in equality of outcomes (measured by share of women  
in parliament and gender gap in labour force participation) (Mitra et al., 
2015);
loss in output per worker due to gender inequality in labour market 
participation (- 40 % when all women are excluded from labour market) 
(Cuberes and Teignier, 2016);
8 % increase in the annual rate of GDP growth due to the growth in 
women’s share in formal sector employment (Klasen, 1999);

• 

• 

•  positive effect on the annual rate of GDP growth due to the growth in 

women’s share of the labour force (magnitude depending on the econo-
metric specification used, Klasen and Lamanna, 2009);
3.4 % growth in total factor productivity due to the growth in the share 
of women in the labour force (Loko and Diouf, 2009).

• 

 ■ Country level:

• 

0.28 % GDP increase in Italy with +1 % women’s employment rate (Casar-
ico and Profeta, 2007);

•  higher Italian GDP if women’s employment rate increases (three different 

• 

possible scenarios are presented, Zisza, 2008);
0.3 % annual increase in real GDP in Japan if women’s participation rate 
increases by 9 % (Matsui et al., 1999);

•  higher GDP in New Zealand if women increase labour force participation 

• 

(two different possible scenarios are presented, Bryant et al., 2004);
from 2 % to 9 % higher GDP in Latin America by removing gender segre-
gation in occupation (Tzannatos, 1999);

•  higher per capita income (+ 319 %) by increasing the ratio of women-to-
men managers (from 100 % men to 50-50) and higher per capita income 
(+ 153 %) by increasing the ratio of women-to-men workers (from women  
being 50 % of the employed to 66 %) in India (Esteve-Volart, 2009).

18

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Fertility

Investment in health and 
education of children

POSITIVE EFFECT/INCREASE
 ■ Del Boca et al. (2005) show that there is a positive correlation between em-

ployment and fertility across EU MS

 ■ In countries where it is relatively easy for women to work and have children, 
women’s employment and fertility both tend to be higher (Daly, 2007)
 ■ A more gender equal labour market, welfare system, or households can be 
accompanied by higher fertility at similar or even higher levels of employ-
ment (Smith and Bettio, 2008)

POSITIVE EFFECT/INCREASE
 ■ Higher women’s labour market participation increases bargaining power in 
the household with positive effects on children’s human capital (Klasen and 
Lamanna, 2009; Kabeer and Natali, 2013)

Additional taxes and social 
security contributions

POSITIVE EFFECT/INCREASE
 ■ Higher women’s labour market participation increases public revenues 

(Maier and Carl, 2003)

Increasing 
gender 
equality 
in labour 
market  
participa­
tion

Social capital

Time devoted by fathers to 
childcare activities

GDP growth rate

Reducing 
the gender 
pay gap

Savings rate

Expenditures on goods  
and services for children/
sustainable goods

POSITIVE EFFECT/INCREASE
 ■ Higher labour market participation increases the opportunities of making 

social connections and networks at the workplace (Putnam 2000; Norris and 
Inglehart, 2003; Paugam and Russell, 2000)

POSITIVE EFFECT /INCREASE
 ■ Fathers increase their care-giving time when mothers increase their paid 

work (Hallberg and Klevmarken, 2003; Sayer et al., 2004; Mancini and Pasqua, 
2012)

POSITIVE EFFECT ON GROWTH
 ■ No evidence that wage discrimination stimulates economic growth  

(meta-analysis study, Schober and Winter-Ebmer, 2009)

 ■ Higher women’s wages reduce men’s wages only marginally and increase 

GDP (simulation study on Latin America, Tzannatos, 1999)

 ■ Wage discrimination discourages women’s labour market participation and 
decreases GDP per capita (theoretical model applied to US data, Cavalcanti 
and Tavares, 2008)

NEGATIVE EFFECT ON GROWTH FOR EXPORT-ORIENTED COUNTRIES
 ■ Reducing the pay gap reduces economic growth in the short run (study on 
20 export-oriented semi-industrialised countries, Seguino, 2000 and 2011)

POSITIVE EFFECT/INCREASE
 ■ 1 % increase in the women’s wage bill share raises aggregate savings rate by 

0.25 % GDP (Seguino and Floro, 2003)

 ■ Higher women’s wages increase saving rates (study on older US individuals, 

Rossi and Sierminska, 2014)

 ■ Higher women’s wage rates can lead to higher formal savings (Lee et al., 

2010)

POSITIVE EFFECT/INCREASE
 ■ Women may have a stronger preference than men for spending on goods 
and services that contribute to the human capital of their children (Stotsky, 
2006)

 ■ Women tend to buy more eco-labelled or organic food, have a higher 

propensity to recycle, place more value on efficient energy, and pay closer 
attention to ethical issues in purchases than men (OECD, 2008)

Economic benefits of gender equality in the European Union 19

EIGE2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Women’s health

Women’s labour market 
career

Increasing 
gender 
equality  
in the dis­
tribution 
of unpaid 
work

POSITIVE EFFECT
 ■ Women’s greater hours of unpaid work contribute to women experiencing 

more stress than men (study on time use data from Canada, McDonald et al., 
2005)

 ■ Equalising gender roles would improve women’s health (study on time use 

data from US, Bird and Fremont, 1991)

POSITIVE EFFECT
 ■ Paternity leave is correlated with shorter career breaks, longer working hours, 
fewer penalties in terms of promotions and wages and improved labour 
market positions for mothers (Pylkkanen and Smith, 2003; Keck and Sara-
ceno, 2013)

Children’s well­being (social, 
emotional, physical and 
cognitive development)

POSITIVE EFFECT
 ■ Fathers’ involvement in childcare is positively associated with children’s social, 
emotional, physical and cognitive development (Tamis-LeMonda and Cabre-
ra, 2002; Allen and Daly, 2007; Lamb, 2010)

Fertility

Increasing 
availability, 
afforda­
bility and 
quality of 
social infra­
structure

Labour market  
attachment  
for mothers

POSITIVE EFFECT
 ■ Family reconciliation policies in the Nordic countries have a positive impact 

on fertility (Datta-Gupta et al., 2008)

 ■ Family policies can promote the labour supply of women and more equal 

role-sharing between mothers and fathers in Denmark and Sweden (Pylkka-
nen and Smith, 2003)

 ■ Unequal division of non-paid work within the household, and weak support 
for combining work and parenthood, reduce fertility intentions (Mills et al., 
2008)

 ■ There is a positive correlation in OECD countries between attitudes support-

ing gender equality in the work environment and fertility (Mortvik and Spant, 
2005)

 ■ Lower labour market penalties due to childbearing breaks induce higher 

fertility rates (Adsera, 2004)

POSITIVE EFFECT
 ■ Long and well-paid leave and generous provision of childcare services help 

mothers to remain in paid work (Keck and Saraceno, 2013)

 ■ Policies that help women to reconcile work and family increase women’s 

employment and reduce employment penalties after motherhood (Pacelli et 
al., 2013)

20

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

POSITIVE EFFECT/INCREASE
 ■ International level including EU level:

• 

•  greater women’s representation in top positions is associated with 10 % 
higher rate of return on equity (report on EU companies, McKinsey & Co., 
2007);
companies with more women board members experience 53 % higher 
returns on equity, 42 % higher returns to sales, and 66 % higher returns 
on invested capital (study on Fortune 500 companies, Catalyst, 2007);
•  gender-diverse boards are associated with significantly higher firm value 
(study using data on the Fortune 1000 firms in 1997, Carter et al., 2003);
the proportion of women board members is positively correlated with 
the rate of return on assets and the rate of return on equity (study on the 
500 largest EU firms over the years 2010-2012, Isidro and Sobral, 2015).

• 

 ■ Country-level academic studies:

Increasing 
gender 
equality 
in firms’ 
leadership 
positions

Firm performance/labour 
productivity

• 

• 

• 

• 

top women managers are positively associated with firm profits, value 
added and revenues (study on 2 500 largest Danish firms for the 1993-
2001 period, Smith et al., 2006);
top women managers significantly improve firm financial performance, 
but only when the firm’s strategy is focused on innovation (study on 
1 500 US S&P firms, Dezno et al., 2012);
firms with gender-diverse boardrooms are generally associated with 
increased labour productivity (study on 288 largest Australian firms,  
Ali et al., 2014);
firms with a higher percentage of women board members are associ-
ated with significantly higher firm financial value (study on a sample of 
Spanish publicly listed companies over the 1995-2000 period, Campbell 
and Minguez-Vera, 2008);
labour productivity in firms with a woman chief executive officer (CEO) 
significantly increases with the share of women workers (study on Italian 
manufacturing firms with at least 50 employees, Flabbi et al., 2014);
•  women directors working in women-owned firms are associated with 
significant improvements in the firm’s operating profitability (study on 
Italian family-controlled firms over the 2000-2010 period, Amore et al., 
2015).

• 

NULL OR NEGATIVE EFFECT
 ■ Country-level academic studies:

•  women managers do not significantly impact on firm performance 

(study on Danish firms with more than 50 employees, Parrotta and Smith, 
2013);

•  women board members do not significantly affect corporate perform-
ance, (study on United Kingdom (UK) listed firms over the 1996-2011 
period, Gregory-Smith et al., 2013);

•  women board members are not significantly associated with Tobin’s Q (10) 
(study on a sample of listed Danish firms during the 1998-2001 period, 
Rose, 2007);
increased women’s representation in the board of directors significantly 
reduces Tobin’s Q and operating firm performance (study on the Norwe-
gian law on gender quota in boards, Ahern and Dittmar, 2012);

• 

•  gender-diverse boards are generally associated with lower firm financial 
performance (study on a sample of US firms for the 1996-2003 period, 
Adams and Ferreira, 2009).

(12) 

The Tobin Q ratio is calculated as the market value of a company 
divided by the value of the firm’s assets.

Economic benefits of gender equality in the European Union 21

EIGE2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Firms’ employment

Women’s wage/gender 
wage gap

Increasing 
gender 
equality 
in firms’ 
leadership 
positions

Women’s career 
advancements

Gender awareness

POSITIVE EFFECT
 ■ Firms with increasing share of women on boards are significantly less likely to 
undertake workforce downsizing (study on firms affected by the Norwegian 
law on gender quotas on boards, Matsa and Miller, 2014)

 ■ Firms owned by women are significantly less likely than firms owned by men 
to downsize their workforce (study on privately owned US firms in the 2006-
2009 period, Matsa and Miller, 2013)

POSITIVE EFFECT
 ■ Women with wages above the median earn on average more when working 
for a woman CEO than for men CEOs (+ 7.8 % in the benchmark specifica-
tion) (study on Italian manufacturing firms with at least 50 employees, Flabbi 
et al., 2014)

 ■ Women-owned firms are associated with a reduction in the gender wage 

gap by 1.5 % (study on Portugal covering the 1987-2000 period, Cardoso and 
Winter-Ebmer, 2010)

NULL EFFECT
 ■ No evidence that increases in the proportion of women board members has 
contributed to narrowing the gender wage gap (study on firms affected by 
the Norwegian law on gender quotas on boards, Bertrand et al., 2014)

POSITIVE EFFECT
 ■ Increasing women’s leadership helps the career advancements of women in 
the lower echelons of the firm (study on white-collar workers of more than 
4 000 Norwegian firms, Kunze and Miller, 2014)

POSITIVE EFFECT
 ■ Women top managers and working proprietors are associated with firms 

that are more prone to provide childcare facilities and mentor women junior 
staff (study on Germany, Gagliarducci and Paserman, 2015)

 ■ Women leaders are more gender-sensitive than men leaders (study on the 

US, Tate and Yang, 2015)

Increasing 
gender 
equality in 
entrepre­
neurship 
positions

Aggregate productivity and 
income per capita

POSITIVE EFFECT
 ■ Loss in output per worker due to gender inequality in entrepreneurship 

(- 10 % when all women are excluded from entrepreneurship) (Cuberes and 
Teigner, 2015)

22

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

POSITIVE EFFECT/INCREASE
 ■ Country-level studies with loose control on endogeneity:

• 

a larger fraction of women in politics is associated with a significantly 
higher degree of activity when it comes to issues relating to women, 
children and families (study on members of the lower houses of 12 US 
state legislatures in 1988, Thomas, 1991);

•  women are found to have more gender-sensitive policy priorities (study 
on members of the lower houses of 12 US state legislatures in 1988, 
Thomas and Welch, 1991);
child support enforcement policies are higher in states with a high num-
ber of women legislators (study on US states for the 1978-1991 period, 
Case, 1998);

• 

•  higher fraction of women legislators is significantly and positively related 
with expenditure on family assistance per capita, and the degree of child 
support enforcement (study on 48 continental US states over the 1950-
1999 period, Besley and Case, 2003).

 ■ Country-level studies with endogeneity controls/addressing causal 

interpretation:
• 

a greater share of women in local municipalities is associated with 
a significant increase in the expenditure on childcare and the care of the 
elderly (study on Swedish local councils, Svaleryd, 2002);

•  women legislators are found to have a positive impact on policies 

investing in health and early education, to favour gender-sensitive laws, 
and to support redistributive policies (study on 16 larger states in India, 
Clots-Figueras, 2011).

POSITIVE EFFECT/INCREASE
 ■ Women politicians are more likely to cooperate (Paxton and Hughes, 2007)
 ■ Women politicians are more likely to propose new and creative solutions 

to problems (study based on interviews with women politicians of the Thai 
parliament, Iwanaga, 2008)

POSITIVE EFFECT/DECREASE
 ■ Higher shares of women politicians are associated with significantly lower 
levels of corruption (study on a sample of more than 100 countries, Dollar 
and Gatti, 2001)

 ■ Women are significantly more adverse to corruption and tax evasion (Torgler 
and Valev, 2010; World Bank, 2001; Swamy et al., 2001; Beamen et al., 2009)

POSITIVE EFFECT/INCREASE
 ■ Gender quotas in elections significantly increase the years of schooling of 
politicians (study on Italian local municipalities in 1993-1995, Baltrunaite et 
al., 2014)

POSITIVE EFFECT/REDUCTION
 ■ Gender quotas can be helpful in breaking down negative stereotypes 

against women (study on Italian local municipalities, De Paola et al., 2010)

Increasing 
gender 
equality in 
political  
decision­ 
making

Policies concerning  
social issues

Functioning of the 
government

Corruption

Level of education of 
politicians

Gender stereotypes 

Economic benefits of gender equality in the European Union 23

EIGE2. The economic benefits of gender equality in different policy areas

Gender  
equality  
area

Indicator used to measure  
the economic impact of  
increasing gender equality

Evidence of economic impact

Different labour market 
outcomes

Reducing 
the gen­
der gap in 
health

Fertility/marital stability

 ■ Health has an impact on most labour market outcomes: wages, labour force 
participation, hours worked, retirement, job turnover. However, there is a lack 
of studies that analyse gender differences in labour market behaviour as 
a response to health shocks (Currie and Madrian, 1999).

POSITIVE EFFECT/REDUCTION
 ■ Health affects exit out of and entries into employment, with higher impact 

on women than men, Gomez et al., 2010)

 ■ Improved maternal health increased labour force participation of married 

women during the 20th century and generated a rise in income per capita of 
over 50 % via this channel (Albanesi and Olivetti, 2009)

 ■ Access to oral contraception has a positive effect on women’s education, 

career, labour force attachment and earning, and on long-run outcomes of 
children born (Goldin and Katz, 2002; Hock, 2008; Ananat and Hungerman, 
2012; Bailey, 2006; Bailey et al., 2012; Albanesi and Olivetti, 2015)

POSITIVE EFFECT
 ■ Reduction in maternal mortality increased fertility and women’s human 

capital in 25 advanced and emerging economies between 1900 and 2000 
(Albanesi, 2012)

 ■ Reduction in maternal mortality increased fertility in US states (Albanesi, and 

Olivetti, 2014)

 ■ Access to oral contraception has a positive effect on marital stability (Zup-

pan, 2012)

2.1.  The economic benefits of gender 

equality in education

2.1.1.  Background

2.1.1.1.  Gender gap in education in the EU

Women’s performance and participation in tertiary educa-
tion and lifelong learning exceeds that of men in most of 
the EU Member States according to Eurostat data. Yet, this 
advantage fails to materialise on the European labour mar-
ket. According to Eurostat, as of 2015, 16.7 % of women in 
the EU aged 15-29 were NEETs (Not in Education, Employ-
ment or Training), compared to 13 % of men aged 15-29.

One  of  the  reasons  for  this  may  be  that  young  women 
can  often  be  encouraged  to  choose  degrees,  training 
programmes  or  apprenticeships  that  put  them  in  a  less 
favourable position when seeking employment and/or lead 
them into relatively low-wage occupations (13). For instance, 
recent Eurostat data show that while men graduates with 
bachelor’s  and  master’s  degrees  in  science,  mathematics 
and computing accounted for 13 % of all men graduates in 
2012, the same proportion in the female graduate cohort 

(13) 

Eurofound, Working poor in Europe, 2010.

24

Economic benefits of gender equality in the European Union

was  only  6  %  (14).  Consequently,  the  persistence  of  such  
differences  in  the  type  of  education  pursued  by  women  
and  men  may  lead  to  occupational  segregation  and  may 
further reinforce gender stereotypes, resulting in the under-
valuation  of  women’s  work  and  suboptimal  matching  of 
skills and jobs (15).

In the same vein, young women may also face a greater risk 
of in-work poverty than their male counterparts, a problem 
that  worsened  visibly  during  the  recession  of  the  late 
2000s (16). Indeed, some evidence suggests that reductions 
in public spending brought about by the economic crisis 
and related wage and/or job cuts had a particularity severe 
impact on sectors with a traditionally high ratio of women 
workers,  such  as  social  services  and  education  (Perrons, 
2015).

Overall, the gender inequalities in education in the EU are 
likely to be substantially different from those that are found 
in  developing  countries.  In  many  developing  countries, 
women’s participation in tertiary education is low compared 
to that of men and also lags at the level of secondary and 

(14) 

European Parliament, Women and Education in the EU, 2015, available at: 
http://www.europarl.europa.eu/RegData/etudes/ATAG/2015/551301/
EPRS_ATA(2015)551301_EN.pdf

(15)  Mapping  and  Analysing  Bottleneck  Vacancies  in  EU  Labour  Markets. 

Report for the European Commission, 2014.
Ibid.

(16) 

2. The economic benefits of gender equality in different policy areas

primary education. In contrast, in the EU the participation 
and  performance  of  women  in  education  has  improved 
and is now high, although it still fails to translate into labour 
market  outcomes,  possibly  due  to  gender  segregation  in 
education  according  to  specific  study  programmes  and 
areas.

This means that some of the research reviewed below that 
focuses specifically on developing countries is likely to be 
of limited relevance in the EU context. In particular, stud-
ies highlighting that increased overall participation rates of 
women in education result in higher economic growth and 
reduced  fertility  are  likely  to  relate  mostly  to  developing 
countries rather than to EU Member States.

2.1.1.2.   Potential channels through which the gender 
gap in education may affect macroeconomic 
performance

Although  there  is  a  plethora  of  channels  through  which 
changes  in  the  gender  gap  in  education  (in  particular 
attainment level) may affect macroeconomic performance, 
available research most commonly explores the impact of 
education via the labour market (changes in productivity) 
on  economic  growth.  Much  of  the  existing  cross-country 
empirical  research  examines  the  direct  link  between  the 
gender  gap  in  education  and  economic  growth,  rely-
ing  frequently  on  the  various  versions  of  endogenous 
growth models (i.e. variations of the Romer model, which 
incorporate human capital as a variable affecting economic 
growth).  It  is  typically  assumed  that  the  gender  gap  in 
education  has  an  effect  on  productivity  and  hence  on 
GDP per capita, which is used as a measure of wealth. Yet, 
there appears to be no broad consensus among academics 
regarding the direction and magnitude of this relationship. 
In parallel, there also seems to be a number of reasons why 
potential effects could differ widely, depending on whether 
the focus is on developing countries or developed ones (i.e. 
OECD countries). Section 2.1.2 presents detailed discussion 
of empirical research examining this particular path.

Apart from direct effect on economic growth, the research 
has also emphasised a number of other channels through 
which  a  reduction  in  the  gender  gap  in  education  could 
positively  affect  macroeconomic  performance  (see  sec-
tion 2.1.3 for more details).

related  to  the  choice  of  leisure  instead  of  labour.  Howev-
er, while a negative relationship between fertility rate and 
income per capita is supported by cross-country empirical 
data  (17),  there  may  be  very  important  caveats  to  bear  in 
mind, depending on the wealth of the country. The impact 
of education on fertility is likely to be much more ambigu-
ous in developed compared to developing countries. One 
explanation may be that increments in income as a result 
of  additional  education  may  be  valued  more  strongly  for 
people  with  lower  incomes,  which  means  that  additional 
education may have a stronger impact on the decision to 
postpone reproduction in low-income countries.

Another potential channel which is fairly broadly discussed 
in the literature is the positive relationship between wom-
en’s education and employment rate. It is often argued that 
better  educated  women  are  more  likely  to  be  employed 
and,  moreover,  the  earnings  gap  is  also  less  pronounced 
among well-educated women and men than among those 
at the lower educational echelon (Gornick, 2012).

Furthermore,  there  is  considerable  literature  which  focuses 
particularly  on  developing  countries  and  which  indicates 
various  type  of  social  gains  induced  by  the  increasing 
educational performance of women, including improvements 
in  family  and  child  health,  increasing  life  expectancy  or 
improvements in the educational attainment of children (e.g. 
Schultz,  1988;  Behrman  and  Deolalikar,  1988;  Bellew,  Raney 
and Subbarao, 1992; Subbarao and Raney, 1995).

Other  potential  channels  highlighted  in  the  literature  in-
clude increased financial literacy and consequently a high-
er propensity for saving and better pension planning (Lu-
sardi, 2008), as well as a reduction in gender segregation in 
traditionally men-dominated sectors and occupations.

2.1.2.  Effects of the gender gap in education on 

economic growth

In  a  very  influential  paper,  Barro  and  Lee  (1994)  used 
a panel data set of 138 countries to examine the empirical 
determinants of growth, including measures for both female 
and male schooling. In what they see as a ‘puzzling finding’, 
the  education  of  girls  and  women  was  negatively  correl-
ated with growth. Barro and Lee attribute this to a sign of 

One of the most common propositions is that higher edu-
cational attainment among women has a strong negative 
effect on fertility (Barro and Lee, 1994). Women with higher 
education tend to benefit from a higher employment rate 
and higher average income, which may in turn incentivise 
women to postpone the decision to start a family and/or 
have more children, because of a higher opportunity cost 

(17) 

See  for  instance  Gapminder,  Total  fertility  and  income  per  cap-
ita,  2016,  available  at:  http://www.gapminder.org/world/#$-
majorMode=chart$is;shi=t;ly=2003;lb=f;il=t;fs=11;al=30;stl=t
;st=t;nsl=t;se=t$wst;tts=C$ts;sp=5.59290322580644;ti=2015$
zpv;v=0$inc_x;mmid=XCOORDS;iid=phAwcNAVuyj1jiMAkm-
q1iMg;by=ind$inc_y;mmid=YCOORDS;iid=phAwcNAVuyj0TAl-
JeCEzcGQ;by=ind$inc_s;uniValue=8.21;iid=phAwcNAVuyj0XOoBL_
n5tAQ;by=ind$inc_c;uniValue=255;gid=CATID0;by=grp$map_x-
;scale=log;dataMin=194;dataMax=96846$map_y;scale=lin;data-
Min=0.84;dataMax=9.2$map_s;sma=49;smi=2.65$cd;bd=0$inds=

Economic benefits of gender equality in the European Union 25

EIGE2. The economic benefits of gender equality in different policy areas

‘backwardness’in society, where gender differences may be 
confounded with other issues of less developed countries 
that may not have been captured with an initial GDP variable. 
Hence,  these  less  developed  countries  may  experience 
higher growth rates due to a convergence mechanism. Yet, 
this  finding  was  challenged  by  some  of  the  subsequent 
research,  usually  on  the  basis  of  econometric  problems 
in  the  empirical  estimation,  including  multicollinearity 
(Knowles et al., 2002) and a lack of accounting for anomalies 
reflected in the influence of a few outliers, such as four Asian 
countries (Hong Kong, Singapore, Taiwan and South Korea) 
where  very  high  levels  of  growth  were  accompanied  by 
very low levels of female schooling (Stokey, 1994).

Lorgelly  and  Owen  (1999)  were  motivated  by  these  very 
methodological  concerns  about  Barro  and  Lee’s  (1994) 
conclusions. The authors tested the sensitivity of Barro and 
Lee’s (1994) results by deleting selected countries from the 
sample as well as by omitting female education from the 
growth equations. They concluded that both the negative 
coefficient for women and the positive one for men identi-
fied in Barro and Lee’s paper are of a fragile nature.

A study by Baliamoune (2008) used panel data for 41 coun-
tries  —  31  sub-Saharan  African  and  10  Arab  countries 
(time  series:  1974-2001)  —  and  attempted  to  empirically 
assess  the  impact  of  the  various  literacy  ratios  of  women 
and men aged 15-24 on economic growth in the analysed 
countries.  In  the  initial  version  of  the  model,  all  but  one 
variable (investment) including the gender gap in educa-
tion expressed as a literacy ratio did not have a significant 
effect  on  economic  growth.  However,  when  the  authors 
used alternative specifications of the regression equations 
(including  replacement  of  fertility  with  women’s  share  of 
the labour force), they found that the gender gap in edu-
cation has a negative effect on income growth, while the 
measure  of  educational  human  capital  has  a  positive  im-
pact. The  study  found  that  the  gender  gap  in  education 
has a stronger negative effect on growth in Arab countries. 
In addition, the authors found out that the interaction be-
tween openness to trade and the gender gap in education 
has  a  positive  impact.  Indeed,  such  a  result  may  suggest 
that trade-induced growth may parallel greater gender in-
equalities (a large share of uneducated women being em-
ployed  in  export  sectors)  (Baliamoune,  2008).  However,  it 
should be noted that the women-to-men literacy ratio may 
be close to one in most EU countries and therefore may be 
far less suitable as an explanatory variable than in the Arab 
or African countries.

Furthermore,  Brummet’s  (2008)  research  focusing  on  72 
countries (panel data for the 1960-1985 period) found that 
the inefficiencies created by gender gaps in education are 
sizeable enough to decrease productivity to a level that will 

26

Economic benefits of gender equality in the European Union

harm growth rates. The study found the gender gap in ed-
ucation  to  have  a  significant  negative  impact  on  growth. 
Among  three  measures  of  the  gender  gap  in  education 
constructed by the author, primary education displays the 
most significant correlation with growth. The average years 
of schooling differential is also significant, although much 
weaker. As Kabeer and Natali (2013) interestingly point out, 
‘[o]ne possible implication is that countries with higher in-
comes will tend to make goods that require larger amounts 
of human capital to produce. This would make secondary 
education relatively more important than in less developed 
nations.’

impacts  such  as  effects  on 

A  study  by  Klasen  (2009)  aimed  at  capturing  both  the 
dir ect  impact  of  education  on  economic  growth  and 
investment  rates, 
indirect 
overall population growth, and growth in the working-age 
population.  In  the  key  equation  measuring  the  impact  on 
growth,  the  initial  female–male  ratio  of  participation  in 
education was positive as expected, but not significantly so. 
In  contrast,  the  female-male  ratio  of  growth  in  adult  years 
of schooling turned out to be significant. The regions with 
the  largest  gender  gaps  in  education  —  South  Asia,  sub-
Saharan Africa, and the MENA region — were found to incur 
the largest losses in terms of economic growth. For instance, 
the total combined effect (direct and indirect) in South Asia, 
sub-Saharan  Africa  and  the  MENA  region  was  estimated, 
respectively,  at  1  %,  0.8  %  and  0.7  %  of  annual  loss  of  per 
capita growth.

Yet another study which did not yield clear-cut results and 
where findings were fairly sensitive to recalibration of the 
model  is  Knowleds  (2002).  More  specifically,  this  study, 
focusing  on  a  sample  of  75  countries  (panel  data  for  the 
1960-1990  period),  found  the  coefficient  on  girls’  and 
women’s  education  to  be  positive  and  statistically  signifi-
cant  while  the  coefficient  on  boys’  and  men’s  schooling 
was  not  significantly  different  from  zero. The  assumption 
was that countries with a higher level of female schooling 
will have higher levels of labour productivity, other things 
being equal. Yet, a re-estimation of the model, where the 
variable of life expectancy (a proxy for health capital) was 
included, rendered the coefficient on female education in-
significant. In addition, the author also acknowledged that 
coefficients are not always stable when the sample is split 
into developed and developing countries.

In  one  of  the  rare  papers  which  did  not  use  the  regres-
sion model, Lagerlöf (2003) set up a model where increas-
ing  gender  equality  can  lead  to  a  reduction  in  economic 
growth. Based on the simulation, using a two-period model 
driven  by  the  interaction  of  players,  Largerlöf  concludes 
with  the  following  findings:  ‘As  spouses’  human  capital 
levels  become  more  equal,  and  women’s  time  becomes 

2. The economic benefits of gender equality in different policy areas

more  expensive,  couples  respond  by  substituting  quan-
tity for quality in children — fertility thus falls, and rates of 
human  capital  and  per  capita  income  growth  rise.  At  the 
same time, rising levels of human capital also lower mortal-
ity, making population growth rise simultaneously with per 
capita  income  growth.  Eventually,  as  mortality  levels  out, 
and  fertility  continues  falling,  population  growth  starts  to 
decline,  whereas  per  capita  income  growth  continues  to 
rise, stabilising on a balanced growth path.’

2.1.3.  Other types of economic effects of the 

gender gap in education

Apart  from  the  literature  investigating  the  direct  relation-
ship between gender inequality in education and econom-
ic growth at the macro level, there is a substantial literature 
which has examined other types of macroeconomic effects.

A study by Gornick (2012) examined educational differences 
(or their absence) in women’s employment rates, women’s 
and men’s hours worked per week, and gender inequality 
in  both  annual  and  hourly  earnings. The  study  found  that 
better  educated  women  are  more  likely  to  be  employed; 
gender  inequality  in  annual  earnings  is  thus  less  extreme 
among the well educated than among those with a lower 
level  of  education,  driven  largely  by  educated  women’s 
higher employment. More specifically, the study found that 
in 16 out of the 17 countries analysed (18), mothers with post-
secondary education exhibit the highest employment level. 
Women with post-secondary education were also found to 
be on average about twice as likely to be in employment 
as women in the lowest education category, and in some 
countries they were more than six times as likely.

Furthermore,  existing  evidence  suggests  that,  especially 
in  developing  countries,  increases  in  education  among 
girls  and  women  reduce  fertility  (Barro  and  Lee,  1994; 
Brummet, 2008; World Bank, 2011; Klassen, 2009). The fertility 
rate  typically  falls  sharply  when  income  increases  from 
a  very  low  level  to  a  higher,  but  still  below  average,  level. 
The  fall  in  the  fertility  rate  smoothens  thereafter  but  the 
negative relationship between income and the fertility rate 
continues to persist. The common explanation is that better 
educated  women  tend  to  be  more  frequently  employed 
and gain higher wages, which in turn translates into higher 
opportunity  costs  of  exclusion  from  the  labour  market, 
thereby  influencing  reproductive  decisions  (19).  Apart  from 

(18) 

(19) 

Sample  included:  Austria,  Brazil,  Canada,  Czech  Republic,  Estonia, 
Germany, Greece, Guatemala, Ireland, Israel, Luxembourg, Mexico, 
Netherlands, Spain, UK, United States and Uruguay.
‘Fertility  and  living  standards:  Go  forth  and  multiply  a  lot  less’, 
The  Economist,  2009,  available  at:  http://www.economist.com/
node/14743589

fairly clear-cut evidence from empirical data (20), the negative 
impact  on  fertility  is  further  strengthened  in  models  that 
incorporate  the  costs  of  having  and  raising  children  (Barro 
and Lee, 1994).

In  addition,  the  literature  refers  to  other  types  of  social 
benefits,  such  as  reduced  infant  and  child  mortality,  im-
provements  in  family  and  child  health,  and  increases  in 
life  expectancy  (Barro  and  Lee,  1994;  Schultz,  1988;  Behr-
man  and  Deolalikar,  1988;  Bellew,  Raney  and  Subbarao, 
1992; Subbarao and Raney, 1995). There is also some em-
pirical evidence that adult education among women may 
have a greater effect on the involvement of children in the 
household in school-related activities than adult education 
among  men  (Filmer,  1999).  For  instance,  Behrman  et  al. 
(1999) found that children of more literate mothers in India 
study nearly two more hours a night (21).

Apart from looking at the impact of the gender gap in edu-
cation  on  economic  growth,  Klasen  (2009)  also  analysed 
the effects on investment and found a positive and signifi-
cant relationship between education and investment. This 
finding is also in line with some research undertaken at the 
micro level. For instance, using the data collected through 
a survey of women (sample of ~750 women aged 50+), Lu-
sardi (2008) investigated the implications of gaps in finan-
cial literacy on saving and retirement planning. She found 
that  there  is  a  strong  and  positive  correlation  between 
financial literacy, on the one hand, and saving and retire-
ment  planning  on  the  other  (the  results  were  significant, 
at 1 %).

2.1.4.  Methodological approaches in empirical 

research

A common way of exploring the link between the effects 
of  the  gender  gap  in  education  (in  particular  differences 
in attainment level) and economic growth, at least at the 
cross-country level, has been regression analysis (cross-sec-
tion and panel). It is not uncommon that research relies on 
the standard growth model (subject to various extensions), 
with the Cobb-Douglass production function and human 
capital as a key regressor that incorporates various proxies 
for the gender gap in education (see Box 1.1).

(20) 

(21) 

See  Gapminder,  Total  fertility  and  income  per  capita,  2016,  availa-
ble  at:  http://www.gapminder.org/world/#$majorMode=chart$is; 
shi=t;ly=2003;lb=f;il=t;fs=11;al=30;stl=t;st=t;nsl=t;se=t$w-
s t ; t t s = C $ t s ; s p = 5 . 5 9 2 9 0 3 2 2 5 8 0 6 4 4 ; t i = 2 0 1 5 $ z p v ; v = 0 $ i
nc_x;mmid=XCOORDS;iid=phAwcNAVuyj1jiMAk mq1iM-
g;by=ind$inc_y ;mmid=YCOORDS;iid=phAwcNAVuyj0TAl-
JeCEzcGQ;by=ind$inc_s;uniValue=8.21;iid=phAwcNAVuyj0XOoBL_
n5tAQ;by=ind$inc_c;uniValue=255;gid=CATID0;by=grp$map_x-
;scale=log;dataMin=194;dataMax=96846$map_y;scale=lin;data-
Min=0.84;dataMax=9.2$map_s;sma=49;smi=2.65$cd;bd=0$inds=
See http://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article= 
1237&context=parkplace

Economic benefits of gender equality in the European Union 27

EIGE2. The economic benefits of gender equality in different policy areas

Box1.1 Most common proxies for the gender gap in 
education

In terms of proxies used to capture the gender gap in education, there have been clear variations stemming from the 
context of the research and the availability of data. The most common indicators used include:

(i)  the differences in youth literacy rates between girls and boys;

(ii)  the differences between average years of schooling in the population disaggregated by sex;

(iii) the measures of the differential in primary and secondary school enrolment;

(iv) the ratio of the growth rate in women’s/men’s education level for a specific period.

In a seminal study on the determinants of economic growth, 
Barro and Lee (1994) applied multivariate regression where 
the real per capita growth rate was explained by two main 
types  of  variables.  One  incorporated  the  stock  of  human 
capital in the form of educational attainment and health (22), 
and the second comprised a set of fairly standard control 
variables typically used to explain economic growth, such 
as the ratio of government consumption to GDP, the ratio 
of domestic investment to GDP, the fertility rate, the black-
market  premium  on  foreign  exchange,  changes  in  the 
terms of trade, measures of political instability, the amounts 
of political freedom and civil liberties, tariff rates, and so on. 
In  terms  of  educational  attainment  specifically,  it  relied 
on  census/survey  information  on  schooling  of  the  adult 
population (aged 25 and over), by sex and level.

(2008)  relied  on  the  standard 
Similarly,  Baliamoune 
neoclassical  growth  model  with  investment  rate,  human 
capital  and  fertility  rate  as  key  variables.  As  a  proxy  for 
human capital specifically, youth literacy rates were broken 
down by sex. One of the reasons for the selection of such 
a proxy was the use of similar indicators in the Millennium 
Development Goals (i.e. the women-to-men parity index as 
a ratio of literacy rates). The model also took into account 
the crucial role of international trade in terms of its different 
implications for less educated women in developed versus 
developing countries.

Knowles  and  Lorgelly  (2002)  examined  empirical  evi-
dence of the different long-run effects of female and male 
schooling  on  labour  productivity,  relying  on  the  Mankiw-
Romer-Weil version of the neoclassical growth model (with 
Cobb-Douglass exhibiting CRS and positive and diminish-
ing marginal products). Apart from capital, labour and total 
factor  productivity,  this  also  included  broader  measures 

of human capital, which was composed of three types of 
variables: stock of health capital; stock of female education; 
and stock of male education. The stocks of female and male 
education were derived respectively as fractions of real out-
put invested in female/male education and were assigned 
coefficients of α and β, which represented the gender gap. 
Consequently, those coefficients were meant to reflect the 
output  elasticities  with  respect  to  female  and  male  edu-
cation. As a proxy for stocks of educational human capital 
(stock  of  female  and  male  education  in  their  model),  the 
average years of schooling of the population aged 15 and 
over, disaggregated by sex, were used. The stock of health 
capital was proxied by the average life expectancy.

Klasen  and  Lamanna  (2009)  investigated  to  what  extent 
gender  gaps  in  education  and  employment  reduce  eco-
nomic  growth.  In  terms  of  educational  gender  inequal-
ity, female and male education levels were not separated 
in  equations.  Instead,  four  different  education  variables 
were generated: (i) the variable for initial level of education 
in  1960;  (ii)  the  gender  gap  in  education  in  1960;  (iii)  the 
growth in the level of education between 1960 and 2000; 
and  (iv)  the  growth  rate  of  the  female-male  education- 
level  ratio  for  the  1960-2000  period.  Gender  inequality  in 
the  labour  market  was  proxied  by  gaps  in  labour  force 
participation.  The  research  relied  on  cross-country  and 
panel  regressions. The  key  equation  measured  the  direct 
impact of education and the gender bias in education on 
economic  growth,  controlling  for  investment,  population, 
and working-age population growth. The total effect of the 
gender  gap  in  education  on  growth  was  determined  by 
path analysis, in which the direct effect and indirect effects 
were summed to gauge the total effect of gender inequali-
ties in education on growth.

(22) 

Note  that  average  years  of  schooling  are  typically  used  to  proxy 
for stocks of educational human capital (see Barro and Lee, 1994; 
Klassen,  2000),  while  school  enrolment  rates  tend  to  proxy  for 
investment in educational human capital (Knowles et al., 2002).

In a study on the impact of the gender gap in education 
on economic growth, Brummet (2008) used a model which 
assumed  economic  growth  as  being  a  function  of  gen-
der  inequality,  and  included  economic  control  variables 

28

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

affecting growth (i.e. investment, government expenditure, 
exchange rates, etc.) as well as accumulation of human cap-
ital (incorporating a log of life expectancy and initial level of 
education). Three concrete measures of the gender gap in 
education were used: (i) the differences between average 
years of schooling in the population; (ii) a measure of the 
differential in primary school enrolment; and (iii) differen-
tials in secondary school enrolment.

Only a small number of studies relied on techniques other 
than econometric regressions. For instance, in his study on 
the investment decisions of parents that affect human cap-
ital and ultimately growth rate, Lagerlöf (2003) ran a simu-
lation  exercise  based  on  game  theory.  The  author  used 
a  standard  two-period  model  with  a  standard  preference 
assumption used to model parents’ behaviour (i.e. parents 
maximise utility from ‘their investment’ in a child).

2.2.  The economic benefits of gender 
equality in labour market 
participation

2.2.1.  Background

While  there  are  some  studies  considering  the  impact  of 
gender  inequality  on  labour  market  outcomes,  they  are 
limited in number due to a lack of internationally compar-
able  data  and  the  difficulties  in  addressing  endogeneity 
and  reverse  causality  (Kabeer  and  Natali,  2013).  This  is 
particularly  true  with  respect  to  the  wage  gap,  which 
is  investigated  in  section  2.3.  Nevertheless,  this  section 
summarises the empirical research on the impact of gender 
equality in labour market participation on economic growth 
and  other  macroeconomic  outcomes,  which  is  plausibly 
positive, even though often difficult to fully evidence.

Given  the  assumption  that  it  is  possible  to  increase 
employment  without  reducing  productivity  by  the  same 
extent (23), it is easy to imagine the positive effect of gender 
balance  in  terms  of  employment.  Increasing  women’s 
employment will have the same (positive) effect as increasing 
the employment of the whole labour force, translating into 
higher GDP and counterbalancing the negative effect of an 
ageing population in developed countries. This proposition 
has been summarised by Matsui et al. (1999), who first used 
the word womenomics to illustrate the theory that women 
today play a primary role in economic growth.

(23)  With  diminishing  return  to  labour,  more  people  working  would 
reduce  total  productivity.  Studies  usually  consider  that  a  1  % 
increase  in  employment  would  translate  into  a  0.6-0.7  increase 
in  GDP,  thus  the  increase  in  employment  does  not  cancel  out 
completely because of the reduction in productivity.

From the perspective of long-term economic growth, there 
are only two ways that an economy can raise its potential 
growth rate: capital and labour … It is widely acknowledged 
that Japan has already massively overinvested in capital … 
There are only three possible solutions … (1) seek ways to 
raise the birth rate, (2) allow more immigrants into Japan, or 
(3) boost female workforce participation.

Matsui et al. (1999) argued that the third option ‘is the most 
practical  and  realistic  solution’.  OCED  (2012a)  research 
shows that the projected number of people in the labour 
force for the 2011-2030 period is forecasted to remain flat 
or decrease in most European countries (with the exception 
of Ireland, Luxembourg and Norway), if labour force partici-
pation rates for women and men aged 15-64 remain con-
stant (24). On the contrary, converging participation rates for 
women and men would largely counterbalance this trend.

On average, women’s employment rate in the EU is 63.5 %, 
while the rate for men is 75.0 % (data for 20-64 age group 
as of 2014 (25)), which gives a gender employment gap of 
9.5 p.p. The differences at the individual country level are 
sometimes larger.

Following  on  from  the  previous  argument,  many  studies 
in this strand of the literature simply estimate the effect of 
gender  equality  on  the  labour  market  by  simulating  the 
effect  of  increasing  employment  (up  to  a  certain  thresh-
old) on GDP. However, these studies usually do not address 
a number of potential issues, such as the effect on the cur-
rent workforce and productivity (occasionally a productiv-
ity  drag  is  applied),  and  assume  a  completely  elastic  de-
mand (for the limitations of this type of approach, see the 
introduction to this study). Thus, this section separates the 
papers and reports that simply calculate the impact of gen-
der equality through simulations and those that estimate 
macroeconomic regressions, using gender equality in the 
labour market as one of the independent variables.

It  is  worth  adding  a  note  of  caution  before  continuing: 
while  some  studies  refer  to  participation,  others  refer  to 
employment. The two are highly correlated and labour force 
participation could be used as a proxy for employment rate. 
Nevertheless, it may be that a growth in participation would 
not cause the same growth in the female employment rate, 
if  unemployment  among  women  also  increases.  On  the 
other hand, employment rates are available and comparable 

(24) 

(25) 

Number of persons in the labour force in 2011 (2030 in parentheses), 
thousands,  selected  European  countries:  Czech  Republic  5  100 
(4 600), Denmark 2 900 (2 800), Germany 42 000 (47 000), Ireland 
2 100 (2 300), Greece 5 100 (4 900), Spain 22 500 (21 500), France 
29  000  (29  000),  Italy  24  000  (22  000),  Hungary  4  300  (3  800), 
Netherlands 8 900 (8 100), Poland 18 000 (15 000), Portugal 5 300 
(5 100), UK 32 000 (32 000).
Eurostat (2015).

Economic benefits of gender equality in the European Union 29

EIGE2. The economic benefits of gender equality in different policy areas

across the EU thanks to Eurostat data. Data are more prone to 
issues of measurement error and international comparability 
for  developing  countries  (Klasen  and  Lamanna,  2009). 
Consequently,  some  studies 
international 
comparison often use labour force participation.

including  an 

2.2.2.  Direct effects identified through basic 

assessments

In a paper published by Goldman Sachs, Daly (2007) simu-
lated the effect of the elimination of the gender employ-
ment gap on the level of GDP. More specifically, Daly found 
out that aggregate output would rise by 21 % in Italy, 19 % 
in Spain, 16 % in Japan, 13 % in the euro area, 9 % in Ger-
many, France and the United States (US), 8 % in the UK, 5 % 
in Denmark and 3 % in Sweden. The author also points out 
that those estimates assume unchanged productivity and 
hours  worked.  However,  even  with  diminishing  marginal 
productivity of labour, the effects remain large.

Löfström (2009) focuses exclusively on the EU. She first shows 
that  there  is  a  linear  and  positive  correlation  between  GDP 
level and gender equality. She then estimates the effect of full 
gender balance on the labour market, which she assumes is 
characterised  by:  (i)  a  female  activity  rate  equal  to  the  male 
activity  rate;  (ii)  women’s  part-time  work  decreasing  to  the 
level of men’s; and (iii) women’s productivity becoming equal 
to that of men. She suggests interpreting her estimates as an 
upper boundary of potential effect. Simulation shows a poten-
tial GDP increase from 14 % (Slovenia) up to more than 40 % 
(Greece, Malta, the Netherlands), with the EU average of about 
27-29 % (unweighted and weighted respectively), i.e. a gain of 
EUR 6 800 per capita. At the European level, the higher female 
activity  rate  accounts  for  41  %  of  the  total  increase  in  GDP, 
while reduction in part-time employment accounts for 28 %, 
and equal productivity for 31 %. In addition, the author also 
highlights the ‘multiplier’ effect of increasing employment for 
some  types  of  jobs,  for  instance  in  the  elderly  and  childcare 
sectors:  these  sectors  directly  create  jobs  that  often  target 
women, and these jobs also free women from unpaid care re-
sponsibilities, enabling them to increase their labour supply.

In  the  more  recent  projection  proposed  by  Aguirre  et  al. 
(2012),  estimates  are  slightly  lower  than  in  Löfström’s  re-
search.  Authors  show  that  increasing  women’s  employ-
ment rates would have a gross positive impact on GDP for 
selected  European  countries.  It  would  vary  between  3  % 
(Sweden) and 19 % (Italy). Once the productivity drag and 
a  plausible  proportion  of  women  working  part-time  are 
taken into account, the net impact on GDP would vary from 
2 % (Sweden) to 11 % (Italy).

Italian  labour  force  would  increase  by  7  %  and  GDP  per 
capita would rise by 1 percentage point per year, while the 
French labour force would increase by 5.2 % with a respect-
ive GDP per capita rise of 0.4 percentage points (and a total 
increase in GDP of 9.4 % by 2013). Similarly, annual growth 
rates in GDP per capita would rise by 0.5 percentage points 
in the UK and by 0.6 in Belgium.

Some  studies  focus  on  only  one  country.  Casarico  and 
Profeta’s  (2007)  research  focusing  on  Italy  suggests  that  if 
100  000  more  women  worked  (+  1  %  in  the  female  em-
ployment  rate),  GDP  would  increase  by  0.28  %  (26).  Zisza 
(2008) presents three possible scenarios: (i) bringing the fe-
male employment rate to 60 % would increase Italian GDP 
by  6.5-9.2  %  (the  lowest  number  includes  the  productiv-
ity  drag);  (ii)  increasing  the  female  employment  rate  so  it 
was  equal  to  that  of  men  (for  each  macro  region)  would 
increase GDP by 12.3-17.5 %; and (iii) bringing the female 
employment  rate  in  southern  Italy  into  line  with  that  of 
central and northern Italy would increase GDP by 4.0-5.8 %. 
Both studies also point to the virtuous circle that would be 
activated:  first,  increasing  GDP  would  create  resources  to 
be spent on facilitating women working (e.g. public child-
care, parental leave); second, increasing the average wage 
of women would increase the opportunity cost of staying 
at home, fostering women’s participation even more.

Looking outside Europe, Matsui et al. (1999) aimed at iden-
tifying the factors behind the strength of the female econ-
omy. Among other aspects, they suggested that increasing 
women’s participation rate in Japan from 50 % to US levels 
of  59  %  could  boost  real  GDP  growth  by  0.3  percentage 
points  per  year  during  the  2000-2010  period.  They  also 
note that women are boosting consumption in some spe-
cific sectors and that increasing women’s income may thus 
have an additional positive effect on those sectors. The au-
thors have published updated reports every 5 years (Matsui 
et al., 2005, 2010, 2014), in which they have reported similar 
estimates. Even though the female participation rate has in-
creased in the meantime (in 2009 it was 60 %, the target the 
authors fixed in 1999), they have not investigated if it had 
the expected effect on GDP growth.

Bryant et al. (2004) consider the effect of labour force partici-
pation  on  GDP  in  New  Zealand.  They  simulate  the  effects 
under the specific scenario where women aged 25-34 increase 
labour force participation (the ‘young women’ scenario), and 
the  scenario  concerning  the  whole  population  aged  15  or 
over (‘overall’ scenario). The participation rates are set equal to 
the average of the top five OECD countries for the same group 
of  people.  Under  these  hypotheses,  in  the  ‘young  women’ 

The OECD (2012b) estimates that if women’s labour force 
participation were to reach the level of men’s by 2030, the 

(26) 

To  reach  the  employment  rate  of  men,  900  000  more  women 
would need to work.

30

Economic benefits of gender equality in the European Union

scenario GDP would be 1.0 % higher (USD 1 215 million), and 
5.1 % higher in the ‘overall’ scenario (USD 6 101 million). They 
also present alternative specifications, most of them leading to 
larger effect on GDP in both scenarios.

In a different simulation proposed by Tzannatos (1999) (27), the 
author looks at potential welfare loss due to gender segregation 
in specific occupations, focusing on Latin American countries. 
He  shows  that  women’s  wages  can  significantly  increase 
(from + 25 % up to + 96 %, depending on the country), with 
only a modest reduction in men’s wages (from - 6 % to - 13 %), 
leading  to  large  GDP  gains  from  such  a  change  (with  GDP 
rising from + 2 % to + 9 %). However, the percentage of the 
labour force to reallocate is large (from 12 % to 37 %), a process 
which may take a long time. Tzannatos (1999) also underlines 
some of the limitations of this approach: female segregation 
can occur not only in terms of occupations, but also in terms 
of women being predominantly employed in part-time work 
with  high  turnover  rates,  short  job  tenures,  unsocial  hours 
and low trade union membership. However, these features of 
segregation are not evident in the measures of segregation 
used in this approach.

Finally, a recent report (ITUC, 2016) discusses the number 
of new jobs that could be generated by increased invest-
ment in the caring industry in seven OECD countries. The 
authors find that if 2 % of GDP was invested in the care in-
dustry, increases in overall employment ranging from 2.4 % 
to 6.1 % would be generated, depending on the country. 
This would mean that nearly 13 million new jobs would be 
created  in  the  US,  3.5 million  in  Japan,  nearly  2  million  in 
Germany,  1.5  million  in  the  UK,  1  million  in  Italy,  600  000 
in  Australia  and  nearly  120  000  in  Denmark.  As  a  conse-
quence, the employment rate of women would increase by 
3.3 to 8.2 percentage points (and by 1.4 to 4.0 percentage 
points for men). The gender gap in employment would also 
be reduced (by between half in the US and 10 % in Japan 
and Italy), the precise figures depending on specific coun-
try characteristics. However, the overall effect on the econ-
omy  is  not  analysed  in  this  study,  which  simply  discusses 
the additional jobs that would need to be created in order 
to meet increased demand for caring services generated by 
increased public investment.

2.2.3.  Direct effects identified 

through theoretical models and 
macroeconomic regressions

Klasen (1999) assesses the impact of gender inequality in 
education  and  employment  on  the  long-run  economic 
growth rate, building on a theoretical model of economic 
growth proposed by Barro (1991) and Barro and Sala-i-Martin 

(27) 

This study is further discussed in the ‘pay gap’ section 2.3.

2. The economic benefits of gender equality in different policy areas

(1995).  Using  data  from  international  sources  (28)  for  the 
1960-1992  period,  he  estimates  several  single-equation 
macroeconomic  regressions  to  isolate  effects  of  gender 
equality  on  growth.  The  author  controls  for  variables 
which may affect growth. This first paper is mainly focused 
on  education  inequality  but  in  one  specification  it  also 
includes  two  possible  measures  of  gender  inequality  in 
employment. The growth in women’s share of the working-
age population employed in the formal sector has a large 
and significant impact on economic growth (an 8 % increase 
in the annual rate of GDP growth, statistically significant at 
5 % level), while the effect of the growth in women’s share 
of the labour force is not significant. The author suggests 
that the link is twofold: (i) distortion (the average ability of 
workers is lower in the presence of gender inequality); and 
(ii) the measurement effect (work performed by women is 
made  visible),  with  an  additional  increase  in  productivity. 
However, the author is not able to exclude reverse causality 
(economic growth may foster women’s employment), and 
these results should be read with caution.

Klasen and Lamanna (2009) address these issues in a paper 
applying a panel regression (29) to data for the 1960-2000 
period,  using  fixed  effects.  Reducing  gender  inequality  in 
employment may increase the annual rate of GDP growth 
from 2.97 % to 7.86 %, depending on the specification, the 
sample of countries, and the control variables used.

In addition, their results suggest that it is not easy to sep-
arate the education gap and the employment gap and to 
test which one is more important, since results depend on 
the sample, selected time period and variables used. While 
the paper has a good strategy to address potential caveats, 
authors are cautious in completely excluding omitted vari-
able  bias  and  endogeneity.  One  additional  drawback  the 
authors suggest is the difficulty of separating gender gaps 
in education, employment and pay — both at theoretical 
and empirical levels.

More recently, Mitra et al. (2015) attempted to address and 
solve  all  these  problems  by  investigating  the  impact  of 
gender equality on growth using a sample of 101 countries 
for the 1990-2000 period and replicating the same growth 
model,  controlling  for  a  set  of  standard  independent 
variables.  To  include  several  aspects  of  gender  equality 
in  a  single  model,  without 
incurring  multicollinearity, 
the  authors  use  exploratory  factor  analysis  (EFA)  on  five 
measures  of  gender  equality,  which  results  in  two  non-
collinear  factors:  equality  in  opportunity  (inverse  fertility 
rate, secondary enrolment gap, partial literacy rate gap); and 

(28) 
(29) 

Penn World Tables, Wistat (Unicef ), World Bank.
Treating each decade as one observation and using initial values of 
the covariates.

Economic benefits of gender equality in the European Union 31

EIGE2. The economic benefits of gender equality in different policy areas

equality in outcomes (percentage of women in parliament 
and  gender  gap  in  labour  force  participation).  To  address 
endogeneity  and  unobserved  heterogeneity,  they  employ 
the ‘difference  GMM’  estimator,  which  instruments  current 
period  differences  with  the  lagged  values  (Arellano  and 
Bond,  1991).  Finally,  to  solve  serial  correlation,  the  authors 
use  non-overlapping  5  year  averages  of  the  variables  and 
include  some  lagged  variables.  They  find  that  a  standard 
deviation  improvement  in  the  equality  of  opportunity 
increases  growth  by  1.30  percentage  points  (significant  at 
5  %),  and  a  standard  deviation  improvement  of  equality 
of  outcomes  improves  growth  by  1.19  percentage  points 
(significant at 5 %). In addition, using interaction, they show 
that OECD countries benefit more from equality in outcomes. 
Their results are robust to different sensitivity checks.

Esteve-Volart (2009) adopts a somewhat different approach. 
She develops a theoretical model to assess the implication 
of gender discrimination in the labour market, defined as 
exclusion  of  women  from  managerial  positions  and  their 
complete exclusion from the labour market. In the theoret-
ical  model,  she  shows  that  discrimination  reduces  female 
investment  in  human  capital  and  economic  growth,  and 
GDP per capita. These results prove again that the gender 
gap  in  the  labour  market  and  in  education  are  highly 
correlated,  in  both  directions.  The  model  is  tested  using 
data  from  the  Indian  states  over  the  1961-1991  period, 
with  a  regression  where  the  dependent  variable  is  per 
capita  state  domestic  product  and  which  includes  socio-
economic controls. Possible endogeneity is addressed with 
instrumental  variables  (IV).  Both  the  ratio  of  women-to-
men managers and women-to-men workers are positively 
related  to  output:  an  increase  in  the  ratio  of  women-
to-men  managers  in  one  unit  (from  100  %  men  to  50-
50)  would  lead  to  a  319  %  increase  in  per  capita  income 
(582 % with IV); an increase in the ratio of women-to-men 
workers in one unit (e.g. from women making up half of the 
employees to there being twice as many women employed 
as men) is associated with a 153 % increase in per capita 
income (464 % with IV) (30). In addition, the author confirms 
the effect on education. The results are robust to different 
specifications, and the author discusses and excludes the 
notion that they are simply an accounting effect.

Cuberes  and Teignier  (2012,  2016)  propose  a  similar  the-
oretical  framework  which  illustrates  the  negative  impact 
of  gender  gaps  on  resource  allocation  and  aggregate  la-
bour  productivity.  Gender  inequality  is  introduced  as  an 

exogenous limitation to women’s access to entrepreneur-
ship (31) and participation in the labour force. The theoret-
ical predictions are confirmed by simulation.

 ■ Gender inequality in entrepreneurship lowers aggregate 
productivity  and  equilibrium  wages,  since  the  aver-
age talent of entrepreneurs’ decreases; in fact, when all 
women are excluded, the loss in output per worker is 
about 10 %.

 ■ Gender  inequality  in  labour  participation  reduces  in-
come  per  capita:  when  all  women  are  excluded,  the 
income per capita loss is about 40 %.

The  cross-country  analysis  (a  simulation  performed  on 
OECD and non-OECD countries separately, with data from 
the  International  Labour  Organisation  (ILO))  shows  that 
gender gaps cause an average income loss of 15 % in OECD 
countries,  out  of  which  40  %  is  due  to  the  entrepreneur-
ship  gap.  The  authors  also  recognise  some  limitations  in 
the  model  due  to  the  assumption  that  women  and  men 
have  the  same  talent  distribution  (which  may  not  be  the 
case if women are less or more educated), as well as the as-
sumption that there is only one production sector. In add-
ition, they highlight possible future research by introducing 
household production and a dynamic version of the model, 
which would allow for an estimation of the effects on cap-
ital accumulation and growth.

A  recent  paper  (Hsieh  et  al.,  2013)  measures  the  macro-
economic  consequences  of  the  convergence  in  occupa-
tional  distribution  between  white  women  and  men  and 
black people over the last 50 years in the US. They find that 
changes in occupational barriers facing black people and 
women can explain 15 to 20 % of aggregate wage growth 
between 1960 and 2008. Furthermore, essentially all of the 
gain is driven by the movement of women into high-skilled 
occupations.

Loko  and  Diouf  (2009)  include  women’s  labour  market 
participation in a paper that investigates the determinants 
of  productivity  growth  (considered  to  be  the  main  driver 
of long-term per capita growth). The data set includes 62 
countries  over  the  1970-2005  period.  The  authors  firstly 
assess the relationship using principal component analysis 
and  then  estimate  a  productivity  growth  equation,  using 
a  GMM  dynamic  panel  estimator  (Blundell  and  Bond, 
1998).  The  results  show  that  the  growth  in  the  share  of 
women  in  the  labour  force  has  a  positive  and  significant 
effect on prod uctivity growth (3.4 % growth in total factor 
productivity, significant at 10 %).

(30)  When  comparing  these  estimates  with  the  ones  presented 
previously,  readers  should  bear  in  mind  that  they  refer  to  a 
substantial (and hypothetical) reduction of gender inequality in the 
labour market.

(31) 

review  on  patterns  and  determinants  of  women’s 

For  a 
entrepreneurship across countries, see Minniti and Naudè (2010).

32

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

Finally, a study by Cipollone et al. (2013) analyses historical 
trends to assess the role of social policy (i.e. policy related 
to childcare and elderly care) as well as institutional factors 
(changes in labour flexibility and security) in labour market 
participation. The authors find that labour market reforms 
and changes to social policies predict almost 25 % of the 
actual increase in the labour force participation for young 
women, and more than 30 % for highly educated women. 
However, the effects of labour market reforms on the par-
ticipation of low-skilled women in the labour force are sur-
prisingly small. The effects of such policies on men are not 
analysed in this study.

reduced amount of time working mothers spend with their 
children by increasing the amount of time they devote to 
their children (32).

Finally,  increasing  gender  equality,  for  example  through 
a more balanced parental leave system, has been found to 
reduce violence against children as well as intimate partner 
violence and sexual harassment (Holter, 2005, 2013).

2.3.  The economic benefits of reducing 

the gender earnings gap

2.2.4. 

Indirect and long­term effect

2.3.1.  Background

A number of authors have also underlined the positive re-
lationship between employment and fertility in the OECD 
countries  since  1985  (e.g.  Daly,  2007;  Smith  and  Bettio, 
2008). In addition, women’s employment and earnings in-
crease their bargaining power within the household, with 
a positive impact on women’s well-being and savings rate 
as well as higher investments in the health and education 
of children, which contributes to increases in their human 
capital and consequently future economic growth (Klasen 
and Lamanna, 2009; Kabeer and Natali, 2013).

Maier and Carl (2003) provide evidence of the impact of in-
creasing  women’s  employment  —  due  to  improved  avail-
ability of childcare facilities — on additional taxes and social 
security  contributions.  They  conclude  that  public  invest-
ment in childcare, which would enable mothers to return to 
the labour market, could actually increase public revenues 
both for the state and the social security insurance fund.

The  literature  on  social  capital  highlights  further  positive 
impacts of increasing women’s labour market participation. 
Being  in  paid  work  may  in  fact  increase  a  person’s  social 
capital by increasing the opportunities of making new social 
connections and networks through the workplace (Putnam, 
2000; Norris and Inglehart, 2003). On the other hand, much of 
the ‘social exclusion’ literature points to a correl ation between 
unemployment  and  inactivity  and  low  levels  of  social 
connections (Paugam and Russell, 2000). Therefore, it might 
be expected that the relationship between social capital and 
work  has  a  reinforcing  effect,  whereby  participating  in  the 
labour  market  may  increase  social  capital,  while  increased 
(or  at  least  diversified)  social  capital  might  facilitate  labour 
market outcomes (Stone et al., 2003).

Furthermore,  the  increased  number  of  hours  mothers 
spend at work may affect the allocation of time devoted to 
childcare activities within couples (Hallberg and Klevmark-
en,  2003).  Sayer  et  al.  (2004)  and  Mancini  and  Pasqua 
(2012), for instance, found that fathers compensate for the 

One  of  the  most  widely  cited  statistics  to  highlight  the 
gender wage gap asserts that for every dollar earned by men, 
only 77 cents were earned by women in 2010 (33). Similarly, 
in the EU in 2014, gross hourly earnings by women were on 
average 16.1 % below those of men in the EU (EU-28). The 
variation across Member States is 25.4 percentage points, 
ranging from 2.9 % in Slovenia to 28.3 % in Estonia (34). The 
crude statistics do not control, however, for variables that 
allow for differences in characteristics (such as in education, 
age distribution, type of job, experience). After controlling 
for  women’s  and  men’s  different  characteristics,  the  pay 
gap shrinks but still persists. For instance, Hinz and Gartner 
(2005)  find  that  in  Germany  women  earn  15  %  less  than 
men when comparing women and men in the same job, 
occupation and firm. Adding further controls, the earnings 
gap decreases but still persists. The earnings gap is lowest 
among  academics  and  upper  management,  but  is  still 
equal to 7 %. These figures clearly highlight that the gender 
pay  gap  is  the  result  of  different  inequalities  that  affect 
women over the life course. These are as follows: (i) gender 
labour  market: 
segregation 
women  tend  to  be  overrepresented  in  degrees,  training 
programmes  and  occupations  that  offer  lower  wages 
than  occupations  predominantly  carried  out  by  men, 
even  when  the  same  level  of  education  and  experience 
is  needed,  a  phenomenon  known  as ‘the  undervaluation 
of  women’s  work’;  (ii)  occupational  segregation  both 
horizontally  (across  occupations)  or  vertically  (within  the 
hierarchy of occupations); (iii) the career break job penalty 
and  motherhood  wage  penalty  due  to  maternity  leaves; 
and (iv) the uneven division of unpaid domestic and care 
work which affect the ability of women and men to devote 
time to careers and labour market work.

in  education  and 

in  the 

(32)  On this point, see section 2.4 on unpaid care work.
(33) 

US  National  Committee  of  Pay  Equity,  available  at:  http://www.
pay-equity.org/info-time.html. Earnings are considered for a person 
working year-round and full-time.
See http://ec.europa.eu/eurostat/statistics-explained/index.php/
Gender_pay_gap_statistics

(34) 

Economic benefits of gender equality in the European Union 33

EIGE2. The economic benefits of gender equality in different policy areas

However, even when taking into account such inequalities, 
a  gender  pay  gap  can  still  be  observed.  This  is  what  is 
generally  called  the  unexplained  part  of  the  gender  pay 
gap (Oaxaca, 1973). Many unobserved factors contribute to 
generating this unexplained gap. They are gender differences 
in  individual  attitudes  (Babcock  et  al.,  2003),  or  employers’ 
preferences and behaviours that affect the wages of women 
and men. For example, in a recent work by Oaxaca (2015), it 
has been shown that the pay gap can be affected by different 
gendered  preferences  about  the  features  of  a  job. Women 
may  be  willing  to  give  up  additional  salaries  for  increased 
time  flexibility  and  lower  job-related  stress.  In  other  words, 
there could be a trade-off between flexibility and pay. Other 
evidence  (Babcock  et  al.,  2003)  shows  that  part  of  the  pay 
gap can be associated with the absence of bargaining. The 
absence  of  training  in  bargaining  can,  as  a  consequence, 
result in a lower salary than the potentially achievable one.

Differences  in  the  negotiation  attitudes  of  women  and 
men, which can be partly imputed to gendered differences 
in reservation wages, could be an important ingredient in 
explaining the pay gap. All other things being equal, men 
graduates  are  more  inclined  to  ask  for  more  money  and 
employers  might  be  willing  to  reward  this  boldness  with 
higher  wages.  The  research  run  by  Babcock  et  al.  (2003) 
on  Master  of  Business  Administration  students  in  the  US 
highlights that more women than men accepted an initial 
salary offer, with only 7 % of women against 57 % of men 
attempting to negotiate the initial offer. A recent book by 
Gneezy  and  List  (2014)  uses  an  experiment  to  show  that 
attitudes towards competition are driven by nurture, and, 
in  turn,  influence  preferences. Women  compete  as  much 
as men do if they belong to matrilineal societies (35). On the 
other  hand,  identifying  what  causes  the  explained  part 
of the gender pay gap does not mean that the issue dis-
appears. The existence of direct and indirect discrimination 
or structural inequalities — including the undervaluing of 
women’s work — is far from being eradicated. 

In the long run, persistent differences in the women distri-
bution across many occupations and types of job are not 
justified  per  se. If  better  paid  occupations  are  dominated 
by men, the pay gap within the same occupation and task 
could shrink to zero, but it would not imply that there is no 
inequality in the labour market. In fact, this would just high-
light that well-paid jobs are offered to women less often.

An additional factor that has to be considered when study-
ing  the  impact  of  the  gender  pay  gap  on  economic  out-
puts is that wages are the outcome of market forces and 

demand and supply of labour in a given legal framework. 
This  legal  framework  often  imposes  anti-discrimination 
measures.  However,  even  within  the  most  rigorous  legal 
settings, the pay gap can still persist. Wages, despite being 
required (in some countries) to be above a minimum level, 
are  not  fixed  by  law.  Instead,  wages  are  the  result  of  the 
interaction of market supply and demand forces.

Turning to the concept of narrowing the pay gap and its 
consequences,  it  is  clear  that  a  change  in  the  pay  gap  is 
to  some  extent  the  result  of  market  forces  of  demand 
and supply, which are both potentially affected by gender 
biases and, in some cases, discriminations. Analysing how 
the pay gap can induce GDP growth is sometimes similar 
to analysing how labour supply and demand can change 
over time and give rise to a wage more equally distributed 
across  gender.  Demand  and  supply  in  the  labour  market 
generates  the  observed  pay  outcome,  which  differs  by 
gender, as the statistics show.

Both demand and supply reflect potential gender discrim-
ination,  which  could  be  responsible  for  the  pay  gap  (36). 
Labour  demand  is  determined  by  employers  —  who  are 
often men — and who could have biased perceptions of 
women’s  productivity.  This,  in  turn,  could  generate  a  de-
mand for women’s labour that does not adequately reflect 
their productivity. This bias in productivity would thus gen-
erate a lower salary than the efficient one (if real productiv-
ity was taken into account). If these biases attenuate over 
time, women’s salaries would become closer to the level of 
efficient salaries by shrinking the gap.

The supply of qualified labour is often made up predom-
inantly of men. If women start entering more highly reward-
ed  occupations,  the  salary  gap  could  shrink.  As  stated  at 
the beginning of this section, part of the earning gap stems 
from  the  fact  that  women  tend  to  work  in  less  remuner-
ated occupations. By entering more competitive fields, the 
effect on the pay would be positive. However, the pay gap 
is likely to be persistent, albeit diminishing, as long as the 
underestimation of women’s productivity persists.

2.3.2.  Pay gap and economic outcomes: 

direct effects

As  far  as  the  direct  effect  of  the  pay  gap  on  economic 
outcomes is concerned, some research indicates a negative 
effect  of  the  reduced  pay  gap  on  economic  growth,  at 
least  in  the  short  run.  This  evidence  is,  however,  scarce 

(35) 

The  experiment  compares  the  Khasi,  a  matrilineal  society,  with 
the  Masai.  The  Masai  women  showed  little  interest  in  competing, 
while the Masai men did, with a percentage similar to the US one. 
Conversely, Khasi women behaved just like Masai men in this respect.

(36)  We  refer  here  only  to  the  subtle  discrimination  that  both  supply 
and  demand  contains:  employers  undervalue  the  productivity 
associated with women (leading to a lower salary as a result), and 
women undervalue their productivity (absence of bargaining). We 
do not consider ‘illegal’ pay discrimination in this context.

34

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

and  limited  to  the  work  of  Seguino  (2000).  The  author 
uses  a  neoclassical  production  function  framework  to 
estimate  two  sets  of  macroeconomic  regressions  for 
the  1975-1995  period,  covering  20  semi-industrialised 
countries.  The  author  includes  gender  wage  differentials 
computed  from  aggregate  earnings  data  from  the  ILO 
as  an  explanatory  variable  that  is  assumed  to  promote 
technological  advancement  and  thereby  growth.  The 
found  that  export-oriented  semi-industrialised 
author 
countries often rely on a large share of exports generated 
by  women-dominated  manufacturing  industries.  These 
countries are often characterised by a higher level of gender 
wage  inequality  and  higher  levels  of  economic  growth. 
This  relationship  holds  even  when  the  gender  wage  gap 
measure is adjusted for educational differentials. Seguino’s 
argument is that the pay gap makes women more attractive 
for  employers  given  their  lower  wages,  and  that  this  can 
act  as  an  important  incentive  to  employ  women.  Under 
this  hypothesis,  the  gender  wage  gap  can  be  a  stimulus 
to  growth  in  export-oriented  economies  (37). Taking  men’s 
wage as a benchmark, wider gender wage differentials may 
be a signal of the profitability of investment. This is because 
gender  wage  differentials  may  signal  weaker  bargaining 
power on the part of women workers, leading to low unit 
labour costs and an assumption on the part of employers 
of the reduced cost of extracting labour effort from women 
workers, and limited resistance to poor working conditions. 
The gender wage gap is a stimulus to investment but also 
has  an  influence  on  economic  growth  beyond  the  effect 
on  investment,  suggesting  that  this  variable  affects  the 
productivity  of  investment.  The  author  speculates  that 
the  more  patriarchal  the  society,  the  more  gender  wage 
inequality  is  likely  to  produce  more  positive  effects  on 
growth. This is likely to occur because patriarchies produce 
institutions  that  reinforce  the 
internalisation  of  social 
norms which favour men, reducing political resistance and 
therefore the costliness of gender inequality. Schober and 
Winter-Ebmer  (2009),  on  the  other  hand,  using  data  from 
a meta-analysis of existing studies of Blinder-Oaxaca wage 
decompositions, do not find any evidence that more gender 
wage  discrimination  may  stimulate  economic  growth.  On 
the  contrary,  more  discrimination  tends  to  reduce  growth 
rates.  Controlling  for  the  different  productivity  levels  of 
women and men, the authors find that a higher wage gap 
had  a  marginal  negative  effect  on  growth.  None  of  their 
results  —  including  those  with  more  extended  growth 

models — show positive and significant relations between 
a higher gender pay gap and economic growth (38).

The model presented by Blecker and Seguino (2002) shows 
that when nominal wages are rigid and the exchange rate 
is fixed, an exogenous rise in the women’s wage rate need 
not reduce (and may even increase) employment of women 
or men workers, under certain stringent conditions. When 
nominal wages are flexible and the exchange rate follows 
a  crawling  peg,  a  variety  of  short-run  dynamic  outcomes 
are possible. In the saddle-point case, it is possible to have 
an  export-led  boom  in  which  the  gender  gap  is  reduced 
while  the  real  exchange  rate  depreciates  or,  alternatively, 
stagnant exports and a rising gender gap with a chronically 
overvalued exchange rate.

Research performed by Tzannatos (1999) is also note worthy. 
In this work, a simulation in which employers are forced to 
pay  the  same  wage  (implicitly  assuming  no  equilibrium 
in  the  labour  market)  suggests  that  eliminating  wage 
discrimination  would  lead  to  a  one-time  gain  equivalent 
to  approximately  6  %  of  GDP.  To  achieve  gender  wage 
equality, however, approximately 30 % of the labour force 
would have to change occupation.

2.3.3.  Pay gap and economic outcomes:  

indirect effects

The  research  suggests  that  women  tend  to  save  more 
(Seguino and Floro, 2003; Rossi and Sierminska, 2015). This 
evidence could imply that reducing the pay gap generates 
more bargaining power for women, thus leading to a high-
er  saving  rate.  Seguino  and  Floro  (2003)  investigated  the 
effect of reducing the gender wage gap on aggregate sav-
ings.  They  estimated  a  panel  macroeconomic  regression 
on 20 semi-industrialised countries (39) and found that the 
women-to-men earnings ratio as well as women’s share of 
employment  in  manufacturing  had  a  significant  positive 
impact on domestic savings rates. The authors found that 
an increase of one percentage point in women’s share of 
the wage bill raised the aggregate savings rate by 0.25 % 
of GDP. As women’s share of the wage bill was in the region 
of  15-40  %  for  most  countries  in  the  study,  achievement 
of parity could have a correspondingly large effect on the 
aggregate savings rate.

(37) 

Braunstein  and  Brenner  (2007)  analyse  the  relationship  between 
foreign direct investment (FDI) and gendered wages in urban China. 
The  author  finds  that  because  women  and  men  are  segregated 
into  different  types  of  industries  —  with  women  more  likely  to 
be employed in low-skilled, export-oriented production and men 
in  higher  productivity  and  domestically  targeted  industries  — 
the  changing  composition  of  FDI  is  associated  with  increasing 
inequality in female-to-male wages.

(38) 

(39) 

These  findings  have  been  challenged  by  Seguino  (2011),  who 
raised  concerns  about  the  measure  used  (the  wage  gap),  the 
failure to restrict the analysis to the labour-intensive manufacturing 
sectors where women are overrepresented, and the method used 
for  correcting  for  productivity  differences  between  women  and 
men.
Brazil,  Chile,  Colombia,  Costa  Rica,  Cyprus,  El  Salvador,  Greece, 
Hong  Kong,  Indonesia,  South  Korea,  Malaysia,  Mexico,  Paraguay, 
Philippines, Portugal, Singapore, Sri Lanka, Taiwan, Thailand, Turkey.

Economic benefits of gender equality in the European Union 35

EIGE2. The economic benefits of gender equality in different policy areas

Rossi and Sierminska (2014) found similar evidence based 
on  US  data  for  older  individuals.  Using  health  and  retire-
ment  study  data,  they  found  that  women  tend  to  have 
more patience and are more inclined to accumulate wealth, 
particularly financial assets.

Lee et al. (2010) note that a more equal distribution of income, 
by improving women’s wage rates, can lead to higher formal 
savings. Savings in turn are channelled through the financial 
sector  into  companies  to  foster  new  investments.  In  many 
developing countries, access to international capital markets 
is limited, making the domestic pool of savings the most im-
portant  source  of  funds  for  new  capital  investment  needed 
to  stimulate  growth.  Studies  of  the  ratio  of  women-to-men 
earnings as well as of women’s share of employment in manu-
facturing have identified a definite positive effect of increased 
women’s  income  on  household  savings  rates  (Seguino  and 
Floro, 2003). According to Lee et al. (2010), there is also some 
evidence  that  women  make  more  productive  investments 
than their male counterparts, but this remains contested.

Results from these studies highlight that when the pay gap 
is  reduced,  bargaining  power  goes  in  favour  of  women, 
who  will  shift  their  resources  towards  additional  savings. 
At aggregate level, savings will increase, leading to higher 
GDP per capita.

The  implied  gender  disparity  in  saving  propensities  may 
be  linked  to  differences  in  saving  motives  based  on  gen-
der  roles,  as  well  as  divergent  experiences  of  economic 
vulnerability. This presupposes that women and men have 
differing propensities to save due to variations in external 
factors which affect savings behaviour. These findings high-
light the importance of understanding gender differences 
in planning savings and in the formulation of financial and 
investment policies.

In developing countries particularly, microfinance schemes 
usually target women. The rationale relies on the perception 
that women make more productive investments than men. 
While the evidence on this point is mixed, as reported by 
a study conducted by Chatham House (Ward et al., 2010), 
women  do  tend  to  invest  more  socially,  or,  at  least  they 
claim to have this concern. A survey carried out among US 
investors shows that more women than men claim to be 
concerned  about  the  social  content  of  their  investments 
(Centre for Audit Quality (CAQ) Survey) (40).

Evidence on the credit market also highlights the fact that 
women have more difficulties in accessing credit, often at 

(40) 

40 % of surveyed women, versus 29 % of men, are more inclined 
to invest in a company that is operating in a socially responsible or 
environmentally friendly fashion. The CAQ Survey started in 2007.

36

Economic benefits of gender equality in the European Union

a  higher  price. Yet,  this  evidence  is  not  justified  by  repay-
ment behaviour: women are less prone to default than men 
(Alesina  et  al.,  2012).  As  a  consequence  of  this  evidence, 
lower  credit  access  for  women  is  thus  strongly  detrimen-
tal to growth, as women’s business projects are as likely to 
succeed as men’s ones, but they are less likely to be fund-
ed  by  financial  institutions.  Recently,  Cavalcanti  and  Tav-
ares  (2008)  have  proposed  a  growth  model  where  saving, 
fertility and labour market participation are endogenously 
determined and in which there is exogenous wage discrim-
ination against women. According to their model, as barriers  
to women’s labour market participation increase, there are 
two channels through which per capita output decreases. 
First,  output  per  capita  decreases  because  women  work 
fewer hours in the market, and so output decreases for the 
same population. Second, output per capita also decreases  
because wage discrimination discourages women’s labour  
market  participation  and  decreases  the  couple’s  total  
income, leading couples to choose to have more children. 
Both  effects  are  of  similar  magnitude.  A  higher  wage  gap 
thus leads to lower output per capita for two reasons: a dir-
ect decrease in women’s labour market participation and an 
indirect effect through an increase in fertility. Using US data 
in their model, the authors found that a 50 % increase in the 
gender wage gap leads to a decrease in income per capita of 
a quarter of the original output. Their results also suggest that 
a large fraction of the actual difference in output per capita  
between  the  US  and  other  countries  is  indeed  generated  
by the presence of gender inequality in wages.

A report by the Trade Union Congress (Closing the gender 
pay  gap:  an  update  report  for  the  TUC  Women’s  Conference 
2008) shows that women’s unequal pay does not just hurt 
women, but that it is a cost for society as a whole. The re-
port underlines strong links between the gender pay gap 
and child poverty, skills shortages and a cost to the econ-
omy of the under-utilisation of women’s skills in excess of 
GBP 11 billion a year in the UK. The gender pay gap is there-
fore economically inefficient.

A  recent  report  by  the  World  Bank  (2012)  highlights  the 
fact that the main channel of the pay gap and economic 
growth  is  indirect. Women  with  additional  education  will 
narrow the gap by earning more. The pay gap reduction will 
increase the bargaining power of women in the household, 
by  shifting  expenditure  and  investments  towards  more 
investments  in  education  and  in  women’s  health  for  the 
next generation. This is likely to have a spillover effect on 
society  as  a  whole.  There  is  evidence  that  women  may 
have  a  stronger  preference  than  men  for  spending  on 
goods  and  services  that  contribute  to  the  human  capital 
of their children, implying that within a household, women 
might  gear  spending  more  towards  education,  food 
or  healthcare  for  children  (Stotsky,  2006).  Furthermore, 

2. The economic benefits of gender equality in different policy areas

OECD  (2008)  research  shows  that  women  are  more  likely 
to  be  sustainable  consumers,  because  they  tend  to  buy 
eco-labelled or organic food, have a higher propensity to 
recycle and place more value on efficient energy than men. 
They also pay closer attention in their purchases to ethical 
issues such as child labour and fair trade.

Finally, a reduction in the pay gap increases women’s con-
fidence  on  the  labour  market  and  allows  them  to  gain 
more  responsibility  at  work  and  progress  into  leadership 
positions. Women  in  leadership  positions  are  likely  to  act 
as role models for future generations. Thus, the effect is not 
confined to the current generation, and instead is likely to 
spill over to the next generation onwards, with a virtuous 
effect (Booth, 2003).

2.4.  Gender equality, social 

reproduction and unpaid care work

2.4.1.  Background

The  first  economic  analysis  of  the  allocation  of  time  be-
tween genders within the household (Becker, 1965, 1981) 
used the idea of comparative advantage to argue that the 
traditional  division  of  labour  within  the  household  is  effi-
cient  due  to  women’s  lower  wages  in  the  labour  market 
and  their  biological  advantage  in  childcare.  Specialisation 
of one member of the couple in paid work and the other 
member in unpaid work was the optimal solution. Follow-
ing this theory, there is an economic case for an unequal 
distribution of unpaid work between the genders because 
moving away from the traditional division of labour would 
imply a loss in efficiency and ultimately a loss in GDP.

However,  over  the  last  decades,  economists  have  moved 
from the ‘unitary’ model of Becker (1965) to the now preva-
lent  view  that  decisions  are  taken  within  a  ‘non-unitary’ 
framework, developed in particular by Chiappori’s collective 
models (1988 and 1997, and extended by Apps and Rees, 
1996, Donni, 2003, 2008). These models consider specialisa-
tion as a risky strategy taking into account exit options (di-
vorce) or unexpected events (e.g. premature death). A very 
rich literature has been developed to show the economic 
benefits for women to work in the labour market and for 
men to participate in care activities and unpaid work. The 
economic benefits of women’s participation in the labour 
market are analysed in section 2.2 above.

The  argument  about  an  economic  case  for  an  equal  dis-
tribution  of  unpaid  work  can  be  applied  to  both  a  soci-
ety with a very good provision of social infrastructure, i.e. 
childcare and care services for dependents, and a society 
with  a  very  low  level  of  such  infrastructure.  However,  the 

availability, affordability and quality of social infrastructure 
do play an important role in the interaction between paid 
and unpaid work and in fertility behaviours.

It is worth noting in this context that the economic models 
of fertility behaviour developed in the 1970s predict that an 
increase in women’s schooling levels and wage rates leads 
to an increase in their labour supply and to a reduction in 
fertility. However, more recent evidence shows that as early 
as the mid 1980s, the sign of the cross-country correlation 
between women’s labour market participation and fertility 
changed from negative to positive and became more vola-
tile (Del Boca et al., 2005). Boosting women’s employment, 
if  supported  by  adequate  family-friendly  policies,  will  not 
necessarily lead to significant declines in fertility, as was ex-
perienced in the past (Bjorklund, 2007).

Datta-Gupta  et  al.  (2008)  examine  the  effects  of  family  rec-
onciliation policies in the Nordic countries and find that they 
have a positive impact on fertility by alleviating the pressure 
between market and domestic work faced by women. Pylk-
kanen and Smith (2003) provide some evidence that family 
policies can promote the labour supply of women and more 
equal role-sharing between mothers and fathers. They found 
in fact that fathers’ parental leave take-up plays an important 
role  in  the  timing  of  women’s  employment  after  childbirth 
in Sweden. Mills et al. (2008) show that working women fac-
ing an unequal division of non-paid work within the house-
hold, and living in institutional contexts with weak support 
for combining work and parenthood, are likely to limit their 
fertility  intentions.  Mortvik  and  Spant  (2005)  find  a  positive 
correlation between attitudes supporting gender equality in 
the  work  environment  and  fertility,  stressing  that ‘attitudes 
that keep men at work and women at home make it difficult 
for both to combine family life with other priorities’. Adsera 
(2004), using data from developed countries (23 OECD mem-
bers), finds that lower penalties resulting from childbearing 
labour  market  breaks  (e.g.  paid  leave,  stable  work)  induce 
higher fertility rates. Keck and Saraceno (2013) show that the 
availability of long and well-paid leave does not have a nega-
tive impact on the employment of mothers in the medium 
term, whereas ‘too short’ parental leave may be disincentivis-
ing women’s labour market participation. Furthermore, a high 
coverage rate while a child is under the age of three increas-
es  the  employment  of  mothers  in  the  medium  run  signifi-
cantly, whereas high childcare costs are connected to lower 
employment  rates. This  leads  the  authors  to  conclude  that 
the most effective policy to enable mothers to remain in paid 
work appears to be generous provision of childcare services 
for children under 3 years of age. Similarly, the work of Pacelli 
et al. (2013) confirms that policies aimed at helping women 
to reconcile work and family are not only useful in increasing 
women’s  employment  without  reducing  fertility,  they  may 
also reduce employment penalties after motherhood.

Economic benefits of gender equality in the European Union 37

EIGE2. The economic benefits of gender equality in different policy areas

Although  these  literature  findings  cannot  be  taken  as 
a  proof  of  causality,  they  give  an  indication  that  higher 
fertility  could  go  hand  in  hand  with  enhancing  gender 
equality  and  that  there  is  a  role  for  reconciliation  policies 
and  social  infrastructure  in  facilitating  the  materialisation 
of fertility intentions and, consequently, rising fertility rates, 
and improving gender equality. 

2.4.2.  Economic benefits of an increase in men’s 
participation in unpaid care work

In this section, we concentrate on the economic benefits of 
an increase in men’s participation in unpaid work. In order 
to make an economic case for an equal distribution of un-
paid work, the monetary evaluation of unpaid work is not 
sufficient.  Given  a  total  amount  of  unpaid  work,  its  distri-
bution  between  genders  would  not  change  the  value  of 
the total economic activities even if one were to include an 
evaluation of unpaid work.

In order to evaluate the economic benefits of unpaid work 
we need to broaden the concept of economic well-being 
and  to  include  other  indicators  (Smith  and  Bettio,  2008). 
Amartya Sen’s contribution (Sen, 1985, 1992, 1999, 2009) is 
very relevant in this context. Sen underlines that the wel-
fare  of  individuals  and  societies  should  not  be  measured 
by income, expenditure or consumption but it should be 
based on capabilities. He distinguishes between function-
ings and capabilities. Functionings are beings and doings. 
For  instance,  to  have  a  job,  to  be  fed,  or  to  have  an  edu-
cation are considered functionings. Capabilities are instead 
notions of freedom (they can be compared to opportunity 
sets)  and  they  represent  all  the  potential  functionings  an 
individual can choose from. His work is at the base of the 
Human Development Index (UNDP, 2015) and at the base 
of the report by the Commission on the Measurement of 
Economic  Performance  and  Social  Progress  (Stiglitz  et  al., 
2008) generally referred to as the Stiglitz-Sen-Fitoussi Com-
mission. Another relevant framework is the one developed 
by Picchio (1992), which includes the process of social re-
production among the structural processes of production, 
distribution  and  exchange.  This  approach  explicitly  ac-
knowledges the importance of unpaid domestic and care 
work for the reproduction of societies.

To  evaluate  the  economic  benefits  of  unpaid  work,  it  is 
necessary  to  measure  welfare  and  economic  well-being, 
taking into account all its different dimensions (Smith and 
Bettio, 2008). For instance, the Human Development Index 
(UNDP, 2015) takes into consideration some indicators of 
educational  levels  and  health  in  addition  to  measures  of 
income/GDP.

2.4.2.1.  Distribution of unpaid care work

38

Economic benefits of gender equality in the European Union

Kooreman and Kapteyn (1987) pioneered the body of eco-
nomic  literature  analysing  simultaneously  different  types 
of time use within the household. Using time-use data for 
US couples, they studied husbands’ and wives’ time alloca-
tion, considering market work and seven types of unpaid 
activities.

Many  studies  analyse  women’s  time  allocation  only  (see 
among others Kimmel and Connelly, 2007 and Maasen Van 
Den Brick and Groot, 1997). However, thanks to the increas-
ing availability of time-use data, the empirical literature has 
increasingly focused on men, too.

Using  Swiss  data,  Sousa-Poza  et  al.  (2001)  analyse  time 
spent  by  women  and  men  on  housework  and  childcare. 
Their findings suggest that men respond less than women  
to changes in socio-economic variables. However, both better  
educated women and men spend more time on childcare 
activities.  Furthermore,  higher  women’s  wages  increase 
time spent by women in childcare and reduce time spent 
in housework. Hallberg and Klevmarken (2003) use Swedish  
data  to  study  childcare  time  in  double-earner  couples.  
They find that changes in the mother’s working hours do 
not significantly affect either parent’s care-giving time. On 
the contrary, changes in the husband’s working hours are 
compensated  by  the  mother  providing  more  care-giving 
time.  In  addition,  they  find  that  the  presence  of  young  
children affects the mother’s market work and childcare more 
significantly than the father’s. Kalenkonski et al. (2005, 2009) 
analyse  how  parents  allocate  their  time  between  market  
work,  primary  childcare  and  secondary  childcare  in  UK. 
Again, both studies suggest that the presence of children  
affects  both  women’s  and  men’s  childcare  activity,  but  at 
a  very  different  magnitude,  and  that  only  women’s  paid 
work is affected by the presence of (very young) children.  
Kalenkonski  et  al.  (2009)  also  take  into  consideration  the 
effect of wages and find that women’s time spent on paid 
work  increases  with  own  wage  and  decreases  with  the 
partner  wage.  The  authors  also  find  evidence  that  men’s 
care-giving time increases with increasing women’s wages.

Guryan et al. (2008) analyse several countries and find that 
better  educated  parents  generally  spend  more  time  with 
their  children  than  less  educated  parents.  A  similar  result 
is found for the US by Connelly and Kimmel (2009a), who 
report that for both parents an increase in their own wage 
is positively related with time spent in childcare. They also 
find  that  an  increase  in  a  mother’s  paid  work  leads  to  an 
increase in the father’s care-giving time. Likewise, Connel-
ly  and  Kimmel  (2009b)  find  evidence  that  when  mothers’ 
wages are higher, fathers increase their care-giving time at 
weekends. In Spain, Gutierrez-Domenich (2010) finds that 
the father’s care-giving time increases when the mother is 
employed and, again, that better educated parents spend 

2. The economic benefits of gender equality in different policy areas

more time in childcare. Gimenez-Nadal and Molina (2013) 
use time use data for UK and Spain and find that a higher 
educational level for the mother also positively affects the 
father’s care-giving time.

Using  Italian  data,  Bloemen  et  al.  (2010)  and  Mancini 
and  Pasqua  (2012)  analyse  simultaneously  women’s  and 
men’s  time  devoted  to  paid  work,  home  production  and 
childcare.  Both  studies  find  that  the  presence  of  children 
mainly  affects  women’s  allocation  of  time. This  is  a  result 
commonly  found  in  the  literature,  proving  the  ‘second-
earner’ nature of women’s employment. In addition, the two 
studies  suggest  that  well-educated  women  spend  more 
time  in  childcare  and  paid  work,  thereby  to  some  extent 
increasing the time their male partner spends on childcare. 
However,  for  France,  Bloemen  and  Stancanelli  (2014)  find 
that an increase in parents’ wages decreases domestic work 
and childcare for both parents. However, higher women’s 
wages  are  associated  with  a  higher  level  of  unpaid  work 
by  their  partner.  This  result,  in  line  with  previously  cited 
literature,  suggests  that  women  who  are  better  off  in 
terms of actual or potential earnings tend to have a higher 
bargaining power within the household. This result proves 
that spouses’ time allocation is not determined by a unitary 
model of household behaviour, but by a bargaining process 
between family members (Chiappori, 1988, 1997).

Del Boca et al. (2005) show that there is a positive relation 
between  employment  and  fertility.  The  analysis  of  the 
temporal  and  cross-country  patterns  of  women’s  labour 
market participation shows how several factors affect the 
compatibility between childrearing and work (labour mar-
ket  characteristics,  social  services  and  family  wealth). The 
most  significant  factors  which  facilitate  reconciliation  of 
child  rearing  and  work  are  opportunities  for  part-time  ar-
rangements, the availability of childcare and parental leave 
options.

2.4.2.2.  Economic consequences of an increase in men’s 

participation in unpaid care work (41)

An equal distribution of unpaid work can improve women’s 
health  and  children’s  well-being  and  therefore  improves 
the economic well-being of a country.

The  unequal  distribution  of  unpaid  work  has  negative 
consequences  for  women’s  health  levels.  McDonald  et  al. 
(2005), using time-use data from Canada, show that women’s  
greater  hours  of  unpaid  work  contribute  to  women 
experiencing  more  stress  than  men,  and  that  work,  time 

(41) 

Note that in this section paternal leave is used when referring to the 
use of parental leave by fathers. Parental leave is used when both 
the mother and the father can take the leave.

spent  on  care  of  the  elderly  and  housework  are  more 
stressful  than  time  spent  on  childcare.  Bird  and  Fremont 
(1991)  analyse  time  use  data  for  the  US. They  begin  with 
the puzzle that morbidity levels are higher for women than 
men,  despite  women  living  longer. They  conclude  that  if 
gender roles were more equal, women would experience 
better health than men, which would be more consistent 
with their longer life expectancy.

Fathering  has  an  important  role  in  children’s  upbringing. 
Fathers’  involvement  in  childcare  is  positively  associated 
with children’s social, emotional, physical and cognitive de-
velopment (Tamis-LeMonda and Cabrera, 2002; Allen and 
Daly, 2007; Lamb, 2010). These papers show that children’s 
well-being increases with fathers’ involvement.

Paternal  leave  is  an  important  tool  for  increasing  fathers’ 
involvement in childcare. Fathers’ participation in parental 
leave strengthens women’s labour market position, enab-
ling  women  to  return  to  work  earlier  and  eroding  the  ra-
tionale underpinning women’s discrimination in the labour 
market.  Paternity  leave  makes  the  initial  parental  experi-
ence  more  similar  across  gender,  producing  long-lasting 
consequences  on  household  allocation  of  time.  Despite 
the evidence in favour of fathers’ role in child development, 
take-up of leave by fathers is very low.

Loss of earnings is an important factor in fathers’ decisions 
to not take parental leave (Zhelyazkova, 2013). Fathers cite 
workplace attitudes as an obstacle to utilising leave, even 
when they are entitled to it, out of fear that it could damage 
their careers (Bygren and Duvander, 2006). Andreassen et 
al. (2015) utilise data from time use surveys in Spain to show 
that  fathers  are  willing  to  increase  their  time  in  childcare 
activities  if  cultural  and  workplace  barriers  are  addressed. 
Several  studies  have  exploited  cross-country  variation  in 
policies  to  determine  how  easing  these  barriers  can  im-
prove fathers’ leave-taking. Fathers’ leave take-up tends to 
be higher in countries with generous compensation rates 
(Moss and O’Brien, 2006) and is especially low in countries 
like the US, where leave is unpaid (Han et al., 2007). Several  
cross-country  comparisons  have  shown  that  fathers  are 
more likely to utilise leave in countries that have a ‘daddy 
quota’ in place (O’Brien, 2009; Haas and Rostgaard, 2011).

In terms of the long-term effects of paternity leave, studies 
have found that fathers who take leave are more involved 
in childcare (Tanaka and Waldfogel, 2007; Nepomnyaschy 
and  Waldfogel,  2007)  and  that  the  average  time  fathers 
spend  in  childcare  is  higher  in  countries  with  generous 
paternity leave policies (Boll et al., 2014). Moreover, pater-
nity  leave  is  correlated  with  shorter  career  breaks,  longer 
working hours, fewer penalties in terms of promotions and 

Economic benefits of gender equality in the European Union 39

EIGE2. The economic benefits of gender equality in different policy areas

wages, and improved labour market positions for mothers 
(Pylkkanen and Smith, 2003; Keck and Saraceno, 2008).

Taken together, these cross-sectional studies suggest that 
paternity leave is correlated with a less traditional division 
of labour within the household.

More recently, a few studies have sought to identify causal 
effects  of  paternity  leave  by  comparing  the  behaviour  of 
parents  before  and  after  a  change  in  policy  that  led  to 
a  sudden  increase  in  fathers’  leave-taking,  thus  exploiting 
exogenous  variation  in  leave  experience.  Patnaik  (2016) 
Insurance  Program,  which 
uses  the  Quebec  Parental 
improved  compensation  and  reserved  5  weeks  of  leave 
for fathers. Patnaik finds that fathers’ participation jumped 
by 250 %, and he presents causal evidence that paternity 
leave  reduces  long-run  gender  specialisation.  Kotsadam 
and  Finseraas  (2012)  report  that  paternity  leave  leads 
to  more  equal  sharing  of  housework.  They  consider  the 
implementation of the Norwegian daddy quota — 4 weeks 
of  parental  leave  reserved  for  the  father  —  as  a  natural 
experiment,  and  examine  the  long-run  causal  effects  on 
attitudes towards gender equality, on conflicts and sharing 
of household labour, and on support for public childcare. 
For Sweden, Ekberg, Eirksson and Friebel (2013) find strong 
short-term  effects  of  the  daddy  month  reform  on  men’s 
parental leave, but no behavioural effects in the household. 
For  Iceland,  Arnalds,  Eydal  and  Gislason  (2013)  show  that 
there  is  a  direct  correlation  between  the  length  of  leave 
taken by the father and his involvement in care afterwards.

2.5.  The economic effects of women’s 

leadership in firms

2.5.1. Background

The literature on the economic effects of women’s leader-
ship is rather limited. Nonetheless, it is possible to separate 
three main areas of research:

 ■ studies analysing the effect of women’s leadership on 

firm performance;

 ■ research  investigating  the  employment  effects  of 

women leaders; and

 ■ studies assessing the effect of women’s leadership on 

wages and discrimination.

Such  studies  mostly  adopt  a  microeconomic  perspective: 
they examine the benefits achieved by firms when they in-
crease women’s representation in top positions.

40

Economic benefits of gender equality in the European Union

The definition of women’s leadership varies across the studies 
and is defined alternately as the share of women among top 
managers, the share of women among the board of directors, 
or the gender of the CEO, president or owner of the firm.

The vast majority of studies focus on a single country to bet-
ter tackle potential biases in the analysis. However, a small 
number of studies consider the effect of gender diversity in 
leadership positions from an EU perspective.

As often happens, the analysis is complicated by the pres-
ence of many confounding factors and possible biases due 
to  endogeneity  problems.  Causality,  in  fact,  can  work  in 
both  directions:  more  gender  diversity  may  affect  a  firm’s 
performance, and better performing firms may hire more 
women at the top levels. Moreover, as highlighted by Pro-
feta et al. (2014), the presence of women leaders in firms 
is likely to be non-random. Indeed, it is presumably correl-
ated with a number of observed and unobserved factors, 
such as the sector of economic activity, the structure of the 
workforce, the culture of the firm, and its international pro-
file, which, in turn, may influence the firm’s performance as 
well as its wage and employment policies. Not controlling 
for the relevant observable factors, on the one hand, and 
not taking into account endogeneity problems due to un-
observable factors, on the other hand, can lead to a sub-
stantial bias in the estimated effects.

In the absence of ‘natural experiments’ (see below), endogen-
eity  problems  can  be  tackled  with  instrumental  variable 
and/or  fixed  effects  estimations.  Many  studies  assessing 
the  economic  impact  of  women  leaders  resort  to  these 
methods to treat endogeneity (see, for instance, Smith et al., 
2006; Dezno et al., 2012; Adams and Ferreira, 2009). However, 
several papers (especially in the management literature) do 
not  adequately  deal  with  endogeneity,  performing  only 
simple correlation matrices and/or Ordinary Least Squares 
(OLS) estimations, thus delivering possibly biased results (as 
is the case in Rose, 2007 or Ali et al., 2014, for instance).

Notably, some academic studies exploit the enactment of 
a law in Norway in 2006 introducing 40 % gender quotas 
in  the  boardrooms  of  public  limited  liability  companies 
as a quasi-natural experiment, making it possible to iden-
tify, in a ‘cleaner’ way, the causal impact of women board 
members  on  several  outcomes  (see  Ahern  and  Dittmar, 
2012; Bertrand et al., 2014; Matsa and Miller, 2013). Recently, 
however,  Ferreira  (2015)  has  highlighted  a  number  of  as-
pects  that  should  be  taken  into  account  when  using  the 
Norwegian law as a natural experiment to identify the ef-
fects of women directors. These aspects include the correct 
identification of the timing of the treatment brought about 
by the law, and the group of firms not affected by the treat-
ment to be used as a control group.

2. The economic benefits of gender equality in different policy areas

The following sections report a review of the most relevant 
academic  studies  on  the  impact  of  women’s  leadership, 
including  methods  used  to  address  methodological 
problems. Although they are country-specific, to guarantee 
homo geneity  of  research  questions  and  approaches  it  is 
possible to extrapolate a certain number of general findings 
from them. In the discussion, they are divided according to 
the type of economic outcome analysed.

2.5.2.  The impact of women’s leadership on 

economic outcomes

According to a report by McKinsey & Co. (2007), EU com-
panies with a higher representation of women in top pos-
itions outperform sector averages, with a 10 % higher rate 
of return on equity. A report by Catalyst (2007) shows that 
Fortune  500  companies  with  more  women  board  mem-
bers  are  significantly  higher  performing:  they  experience 
53 % higher returns on equity, 42 % higher returns on sales, 
and 66 % higher returns on invested capital. Several aca-
demic and country-specific studies confirm that increasing 
women’s leadership significantly boosts firm performance, 
possibly  because  it  brings  advantages  in  terms  of  social 
and  cultural  diversity  in  the  firm  (for  instance,  Smith  et 
al., 2006; Dezno et al., 2012; Carter et al., 2003; Isidro and 
Sobral, 2013; Ali et al., 2014; Campbell and Minguez-Vera, 
2008).  However,  a  small  number  of  papers  find  a  signifi-
cant drop in firm performance associated with increased 
women’s leadership (for example, Ahern and Dittmar, 2012; 
Adams and Ferreira, 2009).

Relating to the wages and discrimination outcomes, while 
some  studies  suggest  that  women  leaders  significantly 
contribute to reducing the gender wage gap (for example, 
Cardoso and Winter-Ebmer, 2010), other research does not 
find evidence that this occurs (for example, Bertrand et al., 
2014).

Differently, results relating to the effect of women leaders 
on employment substantially agree on their beneficial ef-
fects. Several studies find that women managers and entre-
preneurs are significantly less likely to undertake workforce 
reductions during periods of crisis compared to their male 
counterparts (see Matsa and Miller, 2013, 2014).

These effects are explored in more detail in separate sec-
tions below.

2.5.2.1.  The effects of women’s leadership on firm 

performance

Different  research  findings  suggest  that  higher  levels  of 
gender  diversity  are  positively  correlated  with  a  firm’s 
performance.

Using  15  years  of  panel  data  on  the  top  management  of 
the  US  S&P  1500  firms,  Dezno  et  al.  (2012)  perform  both 
fixed-effect and instrumental variable estimations and find 
that women top managers significantly improve a firm’s fi-
nancial  performance,  but  only  when  the  firm’s  strategy  is 
focused on innovation.

Smith et al. (2006), using a panel data set on the 2 500 lar gest 
Danish firms for the 1993-2001 period, find that women top 
managers are positively associated with firm perform ance, 
as  measured  by  profits,  value  added  and  revenues.  They 
deal with endogeneity issues by inserting firm fixed effects 
in their estimations and by using an external instrumental 
variable approach.

Using  data  on  the  Fortune  1000  firms  in  1997,  Carter  et 
al. (2003) show that gender-diverse boards are associated 
with  significantly  higher  firm  value,  even  after  controlling 
for  several  potentially  confounding  factors,  such  as  firm 
size, industry and several corporate governance measures.

Campbell and Minguez-Vera (2007) concentrate on a sam-
ple  of  Spanish  publicly  listed  companies  over  the  1995-
2000 period and find that firms with a higher percentage 
of women board members are associated with significant-
ly higher firm financial value, after controlling for size and 
a range of firm financial indicators.

Isidro  and  Sobral  (2015),  focusing  on  the  500  largest  EU 
firms  over  the  years  2010-2012,  find  that  the  proportion 
of  women  board  members  is  positively  related  with  firm 
financial performance, as measured by the rate of return on 
assets and the rate of return on equity. This result persists 
after controlling for size, country, several firm-level financial 
measures and the characteristics of the boards.

Flabbi  et  al.  (2014)  use  a  matched  employer-employee 
panel data set for Italian manufacturing firms with at least 
50 employees and find that gender interactions in the firm 
are important. Labour productivity in firms with a woman 
CEO significantly increases with an increase in the share of 
women workers. The authors interpret this finding in terms 
of the greater capability of women leaders to interpret the 
productivity signals of women workers. Their results are ro-
bust to controlling for firm fixed effects, CEO fixed effects 
and worker fixed effects.

Amore et al. (2015) further corroborate the importance of 
gender interactions in the firm. Using data on Italian fam-
ily-controlled firms over the 2000-2010 period, they show 
that women directors working in women-owned firms are 
associated with significant improvements in the firm’s op-
erating profitability. To tackle endogeneity problems, they 
control for firm fixed effects and perform triple-difference 

Economic benefits of gender equality in the European Union 41

EIGE2. The economic benefits of gender equality in different policy areas

estimations associated with a propensity score matching as 
well as external instrumental variable estimations.

echelons of firms may also lead to favourable economic re-
sults (i.e. increased firm performance).

A positive effect is also found by Ali et al. (2014), who, ex-
ploiting data on the 288 largest Australian firms, document 
that  firms  with  gender-diverse  boardrooms  are  generally 
associated with increased firm performance, as measured 
by labour productivity.

A few studies, however, have found the greater presence of 
women in company boardrooms and top management to 
have null or negative effects.

Parrotta  and  Smith  (2013),  using  a  matched  employer-
employee  data  set  on  Danish  firms  with  more  than 
50 employees, find that increases in the degree of women’s 
leadership  are  associated  with  significantly  lower  risk 
attitudes,  as  measured  by  the  variability  of  investments, 
profits,  return  to  equity  and  sales.  On  the  contrary,  once 
controlling  for  firm  fixed  effects,  women  leaders  are  not 
found  to  be  signifi cantly  related  to  a  reduction  in  the 
levels of such variables, thus suggesting, in contrast to the 
findings  of  Smith  et  al.  (2006),  that  women  managers  do 
not significantly impact on firm performance.

Similarly, Gregory-Smith et al. (2013), using data on UK listed 
firms  over  the  1996-2011  period,  find  no  significant  effect 
of women board members on corporate performance once 
endogeneity  problems  are  eased  through  the  system  GMM 
estimator, thus concluding that ‘proposals in favour of greater 
board  diversity  may  be  best  structured  around  the  moral 
value of diversity, rather than with reference to an expectation 
of improved company performance’. In addition, Rose (2007), 
using  a  sample  of  listed  Danish  firms  during  the  1998-2001 
period, found no significant effect of women board members 
on financial performance, as measured by Tobin’s Q. However, 
since this result is based on a simple OLS estimation, it may be 
interpreted as a simple correlation, with no causality.

Using  the  quasi-natural  experiment  provided  by  the  Nor-
wegian quota law, Ahern and Dittmar (2012) show that the 
increase in women’s representation in boards of directors fol-
lowed by the quota caused a significant drop in Tobin’s Q and 
in operating firm performance over the following years.

For a sample of US firms for the 1996-2003 period, Adams 
and Ferreira (2009) find that, even after controlling for firm 
fixed  effects,  gender-diverse  boards  are  generally  associ-
ated  with  lower  firm  financial  performance,  but  are  more 
committed to monitoring activities.

2.5.2.2.  The effects of women’s leadership on 

employment

Academic papers assessing the impact of women’s leader-
ship on employment outcomes are relatively more recent 
and  few  in  number.  As  previously  stated,  these  studies 
agree in suggesting that women leaders positively impact 
employment.

Exploiting  the  quasi-natural  experiment  provided  by  the 
Norwegian  quota  law,  Matsa  and  Miller  (2013)  find  that 
firms hit by the law were significantly less likely to under-
take  workforce  downsizing  than  other  firms.  They  also 
show that this has led to an increase in the relative payroll 
costs and in employment levels. The interpretation of these 
findings  relates  to  different  preferences  between  women 
and men leaders, with women being more generous and 
empathetic than men.

Matsa  and  Miller  (2014)  use  a  panel  data  set  for  privately 
owned  US  firms  covering  the  economic  recession  (2006-
2009) and show that firms owned by women were signifi-
cantly  less  likely  than  firms  owned  by  men  to  downsize 
their workforce. Moreover, they find that workers employed 
in firms owned by women operated with greater labour in-
tensity shortly after the economic recession of 2006-2009, 
and that such firms were less likely to hire temporary work-
ers. The interpretation of this finding is that women-owned 
firms are more likely to carry out labour-hoarding practices, 
that is, to not to lay off employees when it would be eco-
nomically meaningful (for instance, during a recession).

2.5.2.3.  The effects of women’s leadership on wages and 

discrimination

The  impact  of  women’s  leadership  on  wages  and  gender 
discrimination is less studied and the results are contrasting.

Besides  assessing  the  impact  of  women  leaders  on  firm 
performance  (see  above),  Flabbi  et  al.  (2014)  show  that 
women  CEOs  have  a  positive  impact  on  women’s  wages 
at the top of the distribution and a negative impact at the 
bottom, while the reverse is found for men’s wages. They 
interpret this finding in terms of women CEOs being bet-
ter than men CEOs at interpreting women workers’ signals 
of productivity, thus making their wages more sensitive to 
individual productivity of labour.

In conclusion, although some studies find a negative or null 
effect,  most  research  points  to  a  positive  effect,  suggest-
ing that increasing the representation of women in the top 

Cardoso  and  Winter-Ebmer  (2010)  use  a  panel  data  set 
for Portugal covering the 1987-2000 period to show that, 
when  controlling  for  firm  fixed  effects  and  a  large  set  of 

42

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

time-variant characteristics, women-owned firms are asso-
ciated with a reduction in the gender wage gap of 1.5 %, 
thus indicating that increasing opportunities for women at 
the top is important for reducing gender inequality.

In contrast, using the Norwegian law, Bertrand et al. (2014) 
find no evidence that increases in the proportion of women 
board members have contributed to narrowing the gender 
wage gap. They also show that the law has not significantly 
contributed  to  increasing  women’s  participation  in  other 
top positions (i.e. other than that of board member).

Using  a  matched  employer-employee  data  set  on  white-
collar  workers  in  more  than  4  000  Norwegian  firms,  Kunze 
and Miller (2014) evaluate whether there are gender spillovers 
in  career  advancement. They  find  positive  gender  spillovers 
across ranks (from high rank to low rank), thus suggesting that 
increasing women’s leadership helps the career advancements 
of women in the lower echelons of the firm.

Gagliarducci and Paserman (2015), using a large matched 
employer-employee panel data set for Germany, examine 
several  outcomes  of  women’s  leadership,  ranging  from 
firm  performance  to  wage  and  employment  effects. 
In  particular,  they  find  that  women  top  managers  and 
working proprietors are associated with firms that are less 
productive and less investing, and which pay lower wages, 
employ  fewer  people  and  are  more  prone  to  provide 
childcare  facilities  and  mentoring  for  junior  women  staff. 
However, they show that all these relations disappear once 
unobserved time-invariant heterogeneity is controlled for, 
and conclude that there is a substantial sorting of women 
leaders in a certain type of firms, i.e. smaller, less productive 
firms that pay lower wages to their employees and are more 
gender-sensitive.  Women  leaders  are  thus  not  found  to 
have a (negative) causal effect on employment and wages.

Finally,  using  matched  worker-plant  panel  data  from  the 
US, Tate and Yang (2015) show that women workers who 
move from the same closing plant to the same new plant 
experience  a  greater  wage  drop  than  comparable  men 
workers. They also document that this gap is significantly 
smaller in hiring firms with women’s leadership, thus con-
cluding  that  women  leaders  are  more  gender-sensitive 
than men leaders.

Overall, studies on the impact of women leaders on wages 
and discrimination seem to point to women leaders having 
a positive effect. It seems that women leaders contribute to 
reducing the gender differences in the wage drops associ-
ated with job loss, to reducing the gender wage gap (even 
if, according to Bertrand et al. (2014), this result is not sig-
nificant),  and  to  reducing  gender  discrimination  in  career 
advancements.

2.5.2.4.  Women entrepreneurs and economic outcomes

‘Female leadership’ is a broad concept. Women leaders in 
private companies are top managers, CEOs, presidents, di-
rectors and also entrepreneurs.

As discussed in Avolio Alecchi and Radovic-Markovic (2013), 
‘entrepreneurship is an emerging research area among aca-
demics because it is acknowledged that fostering entrepre-
neurial activity is associated with greater economic growth’.

Moreover,  since  women  are  becoming  increasingly  im-
portant  in  fostering  entrepreneurship  activities,  assessing 
whether there are peculiar economic effects associated with 
them is particularly relevant (Alecchi and Radovic-Markovic, 
2013).

Matsa and Miller (2014) find positive spill-overs in terms of 
lower  mass  layoffs  carried  out  by  women  entrepreneurs 
during the economic recession of 2006-2009. Amore et al. 
(2015) show that gender interactions at the top of the firm 
(specifically,  between  the  entrepreneur  and  the  CEO)  are 
important for boosting firm productivity.

Notably, Cuberes and Teigner (2015), using a general equi-
librium occupational choice model where individuals have 
random  entrepreneurship  skills,  quantify  the  effects  of 
gender gaps in entrepreneurship and workforce participa-
tion on aggregate productivity and income per capita. The 
findings  show  that  gender  inequality  creates  an  average 
income loss of 14 % in the short run and 15.4 % in the long 
run for the OECD countries and that, on average, 40 % of 
these losses are due to entrepreneurship gaps. The model 
also estimates an average income loss of 16 % in the short 
run and 17.5 % in the long run for a sample of developing 
countries.

2.6.  The economic benefits of women in 

politics

2.6.1.  Background

An  established  result  both  in  experimental  and  survey- 
based literature is that women have different preferences, 
attitudes and behaviours compared to men.

For instance, Eckel and Grossman (1998) conducted a dic-
tatorship  experiment  designed  to  permit  the  emergence 
of gender differences in economic behaviour, and find that 
women tend to be more socially oriented when taking eco-
nomic  decisions,  while  men  tend  to  be  more  individually 
oriented. Indeed, women are found to donate up to twice 
as much as men to anonymous recipients.

Economic benefits of gender equality in the European Union 43

EIGE2. The economic benefits of gender equality in different policy areas

integrity  tests  of  US 

Ones and Viswesvaran (1998), examining just under 800 000  
employment 
in 
private  industry,  find  that  women  obtain  a  significantly 
higher average score, thus suggesting that they are more 
trustworthy and less corruptible than men.

job  applicants 

Moreover, women tend to be different from men concern-
ing political ideas. They are generally found to favour redis-
tribution more often, to support child-related expenditures, 
and to be more liberal.

Alesina and La Ferrara (2005), using a long panel data set 
on  US  individuals  providing  information  on  sociopolitical 
preferences and a set of individual characteristics (e.g. age, 
gender, socio-economic background, etc.), find that women 
are significantly more likely to favour redistributive policies, 
when keeping constant many possibly confounding factors 
such as age, race and education.

Miller  (2008)  uses  the  introduction  of  women’s  suffrage 
in  the  US  between  the  late  19th  and  early  20th  century 
to  assess  whether  women  have  different  political  prefer-
ences compared to men. Using data on child mortality at 
the state level, he shows that the advancement of women 
helped  to  reduce  child  mortality  over  the  years,  because 
women  electors  favoured  policies  aimed  at  improving 
children’s  health  (e.g.  relating  to  the  introduction  of  new 
vaccinations).  His  identification  strategy  relies  on  the  fact 
that US states adopted women’ suffrage at different points 
in time, thus allowing a simple diff-in-diff estimation to be 
performed.

On  the  basis  of  the  suggestion  that  women  are  becom-
ing increasingly left-leaning, Edlund at al. (2005) trace this 
trend  back  to  the  decline  of  marriage.  Using  the  German 
Socio-Economic Panel (GSOEP) data set on individuals, they 
show that transitions out of marriage make women signifi-
cantly more likely to become left-leaning. Moreover, using 
data  on  public  expenditure  for  nine  high-income  OECD 
countries  over  the  1980-1999  period,  they  show  that  the 
rise in unmarried women is significantly related to the rise 
in childcare expenditure.

2.6.2.  The impact of women politicians 
on policy determination

Such  gender  differences  in  behaviour  and  political  ideas 
may materialise in the differential impacts of women and 
men in leadership positions, both in the private sector and 
in politics. While studies examining the impact of women 
leaders  in  private  companies  are  numerous  and  their 
number is constantly increasing, the same does not apply 
to research on the economic impact of women in politics. 
Nonetheless, it is possible to identify two broad categories 

44

Economic benefits of gender equality in the European Union

of research on the latter topic: studies that investigate the 
impact of women politicians on policy determination and 
studies  concentrating  on  their  impact  on  government 
effectiveness.

Concerning the first group, the literature agrees on the sug-
gestion that women politicians prioritise social issues and 
that they favour redistributive policies.

Thomas  and  Welch  (1991),  concentrating  on  a  cross-sec-
tion of members of the lower houses of 12 US state legis-
latures in 1988, find that women legislators are not signifi-
cantly  different  from  their  male  counterparts  in  terms  of 
legislative activities. Indeed, they do not significantly differ 
in the degree of introduction and passage of bills. However, 
women are found to have somewhat different policy prior-
ities compared to men, in that they tend to support more 
intensively gender-sensitive policies and seem to prioritise 
them more than men legislators.

Thomas (1991), using the same data set as Thomas and Welch 
(1991) to explore the relationship between the percentages 
of women in US state legislatures and their policy priorities, 
finds that US states with a larger fraction of women in politics 
are associated with a significantly higher level of activity when 
it comes to issues relating to women, children and families, 
as measured by the numbers of priority bills introduced and 
passed.  She  concludes,  therefore,  that  women  significantly 
contribute to shaping policy determination in the US.

Case (1998), using a panel data set on US states for the 1978-
1991  period,  finds  that  child  support  enforcement  policies 
were  significantly  strengthened  (higher  rate  of  passage 
of  several  child  support  laws)  in  states  where  the  number 
of  women  legislators  was  higher.  This  result  persists  after 
controls for fixed effects, state effects and several time-varying 
economic variables at the state level, such as the proportion 
of elderly and black people and the rate of employment.

Using data for the 48 continental US states over the 1950-
1999 period, Besley and Case (2003) find that a higher frac-
tion of women legislators in the states’ lower houses is sig-
nificantly and positively related with expenditure on family 
assistance per capita, while a higher proportion of women 
in the upper houses is associated with a significant increase 
in  the  degree  of  child  support  enforcement. These  results 
are robust to controlling for state and year fixed effects and 
a large series of time-varying state-level controls, such as the 
distribution of the population by age and its average income.

However,  the  previous  findings  cannot  be  given  a  causal 
interpretation, since they do not deal with possible endo-
geneity problems stemming from the omitted variable and 
simultaneity issues.

2. The economic benefits of gender equality in different policy areas

Indeed, as highlighted by Clots-Figueras (2011) in India, elect-
orates  that  elect  women  politicians  are  arguably  different 
from  those  that  do  not  and  the  characteristics  that  differ 
may  influence  political  decisions  through  other  channels 
(omitted  variable  problem).  For  instance,  it  may  be  that 
there is a higher fraction of women politicians in countries 
naturally  more  sensitive  to  social  issues  related  to  women 
and  children.  If  this  is  the  case,  higher  fractions  of  women 
in politics would be found together with a greater level of 
government activity in the area of social policy. Therefore, not 
controlling for such unobserved heterogeneity may possibly 
hinder the identification of the causal effect of interest.

Moreover,  it  may  be  the  case  that  women  politicians 
not  only  influence  policy  outcomes  but  also  that  policy 
programmes  influence  women’s  participation  in  politics 
(simultaneity  problem).  For  instance,  governments  that 
more often implement policies in favour of gender equality 
may  contribute  to  the  increase  in  women  in  leadership 
positions,  in  the  private  sector  and  also  in  politics.  Again, 
not  controlling  for  this  simultaneity  problem  can  prevent 
the identification of the causal effect.

Only a few papers deal with endogeneity problems so that 
it  is  possible  to  extract  a  causal  interpretation  from  their 
conclusions.

Svaleryd  (2002),  using  a  survey  on  Swedish  local  councils, 
investigates whether the degree of women’s representation 
in  such  institutions  influences  the  patterns  of  public 
expenditure. In order to deal with problems stemming from 
time-invariant  unobserved  heterogeneity  (i.e.  the  ‘culture’ 
of  a  local  council),  she  performs  fixed  effects  regressions. 
Moreover, she also deals with the simultaneity problem by 
exploiting the instrumental variable approach. In particular, 
besides implementing the famous system GMM estimation 
(Blundell  and  Bond,  1998),  Svaleryd  exploits  the  changes 
in the number of seats in the local councils as an external 
instrument. She finds that a greater share of women in the  
local municipalities is associated with a significant increase 
in expenditure on childcare relative to the care of the elderly.

Clots-Figueras  (2011),  using  data  from  16  larger  states  in 
India,  exploits  close  elections  as  an  identification  strategy 
and finds that the gender of the legislators matters for pol-
icy determination. In particular, women legislators are found 
to have a positive impact on policies investing in health and 
early education, to favour gender-sensitive laws, and to sup-
port  redistributive  policies.  However,  she  shows  that  the 
social position (i.e. caste) is also an important predictor of 
women’s impact on policies. Indeed, the latter result applies 
only to women legislators in seats reserved for lower castes 
and disadvantaged tribes. Women legislators belonging to 
higher  castes,  on  the  contrary,  are  not  found  to  have  any 

impact on women-friendly laws, and seem to limit redistri-
bution,  to  support  investments  on  advanced  rather  than 
primary education, and to reduce social expenditure.

2.6.3.  The impact of women politicians on 

government effectiveness

Relating to the second group of studies, that is, those ex-
amining the impact of women politicians on the function-
ing of governments, there is a large consensus on women’s 
beneficial impact.

As reported by Paxton and Hughes (2007) in a comprehen-
sive book about the global situation of women in politics, 
there  is  a  large  consensus  on  the  fact  that  women  polit-
icians  are  more  likely  to  cooperate  and  to  work  alongside 
members of the opposite political party when it is import-
ant  to  reach  a  decision  in  a  short  time.  Moreover,  there  is 
compelling evidence that women are more concerned with 
satisfying  the  population’s  needs,  while  men  concentrate 
more often on increasing their own political power. Indeed, 
as discussed in Paxton and Hughes (2007), women are more 
likely to use political power as ‘a way to get things done’ as 
opposed to a means of controlling or influencing others.

Iwanaga (2008), conducting a large number of interviews 
with  women  politicians  in  both  the  lower  and  the  upper 
house of the Thai parliament in 2002, reports that women 
are  more  likely  to  propose  new  and  creative  solutions  to 
problems,  while  their  male  counterparts  usually  rely  on 
standard  approaches  which,  in  turn,  they  implement  in 
a more authoritative way. He also reports that parliamen tary 
women tend to make more responsible choices in voting 
than men, conscientiously considering the effects of a bill, 
as opposed to voting on the basis of how the vote would 
affect her career. This is coupled with the fact that women 
politicians ‘expressed a motivation for entering politics that 
could be more or less characterised as civic-oriented’.

Finally,  in  keeping  with  the  strong  evidence  that  women 
politicians  are  less  prey  to  corruption  than  their  male 
counterparts,  Dollar  et  al.  (2001)  find  that  higher  fractions 
of women politicians are associated with significantly lower 
levels of corruption in a sample of more than 100 countries. 
This result is robust to controls for a wide range of variables, 
ranging  from  the  country’s  GPD,  population,  ethnic  diver-
sity and schooling, to regional dummies. Other studies have 
investigated  the  gender  attitudes  towards  corruption  and 
tax  evasion  (Torgler  and  Valev,  2010;  Beaman  et  al.,  2009; 
Swamy et al., 2001), finding that there is a significantly greater 
aversion to corruption and tax evasion among women.

Baltrunaite  et  al.  (2014)  examine  the  impact  of  gender 
quotas  on  the  quality  of  politicians.  Gender  quotas  were 

Economic benefits of gender equality in the European Union 45

EIGE2. The economic benefits of gender equality in different policy areas

introduced in Italian local municipalities in 1993 and were 
in force until 1995. Since the period covered by the reform 
was  very  short,  some  municipalities  never  voted  under 
the  gender  quota  regime. This  allows  the  authors  to  use 
a diff-in-diff approach. They find that gender quotas have 
signifi cantly  contributed  to  an  increase  in  the  quality  of 
polit icians,  as  measured  by  years  of  schooling.  They  also 
find that this positive effect persisted in the long run and is 
robust to controlling for political ideology and competition.

Exploiting the same law on gender quotas in Italian local 
municipalities, De Paola et al. (2010) analyse the impact of 
such  quotas  on  women’s  involvement  in  political  activity. 
They  show  that  women’s  representation  in  politics  after 
the  reform  increased  significantly  more  in  municipalities 
that were affected by the reform than in municipalities that 
were  not  affected.  Therefore,  they  conclude  that  gender 
quotas  can  be  helpful  in  breaking  down  negative  stereo-
types against women.

Bonomi et al. (2013) examine the impact of gender quotas 
introduced  in  regional  elections  in  Italy  in  1995  on  votes 
for women candidates. The Italian regional electoral system 
allows voters to choose both the party and the specific can-
didate according to an open-list proportional system. The 
authors  calculate  that  a  50  %  gender  quota  in  candidate 
lists  is  related  to  a  substantial  increase  in  the  probability 
that voters will choose women candidates, from 12 to 36 %.

In  conclusion,  while  the  literature  on  the  impact  of  women 
politicians  is  rather  limited,  it  is  unanimous  on  the  results. 
Women  politicians  seem  to  take  into  greater  consideration 
social issues as well as to render governments more ‘clean’ and 
effective.  Therefore,  increasing  women  participation  in  pol-
itics, besides being a matter of justice and ethically desirable, 
seems also to have relevant political and economic benefits.

2.7.  The economic benefits of ending 

violence against women

The literature on the economic benefits of eliminating vio-
lence against women focuses on the annual cost of such 
violence, borne by society or by the victims, and usually it 
does not assess the impact of such violence on GDP growth 
or economic development.

In  addition,  with  respect  to  other  domains,  a  number  of 
issues emerge that are worth mentioning.

First, estimating the cost of gender-based violence requires 
a  number  of  different  data:  the  extent  of  gender-based 
violence  (prevalence,  frequency,  severity);  the  utilisation 
of services; the direct impact on victims; the impact of the 

46

Economic benefits of gender equality in the European Union

violence on the employment of victims; the value placed 
on the reduced quality of life. Most of these  data  are not 
easily available, and even when they are, they are likely to 
be  underestimated  (e.g.  the  extent  of  violence).  It  is  well 
known,  for  instance,  that  victims  tend  to  underreport 
episodes  of  violence  to  health  services  or  to  the  police. 
On  the  other  hand,  representative  surveys  have  scarce 
information on service utilisation. For this reason, additional 
information sources are needed. The following ones have 
been used, and are listed in EIGE (2014): expert judgement, 
victim  recall,  administrative  data,  population  data  sets, 
studies of similar harms, and specialised research projects. 
With  the  exception  of  expert  judgement  and  victim 
recall,  each  one  of  the  others  has  some  positive  aspects. 
If the extent of gender-based violence is underestimated, 
obviously  the  costs  will  also  be  underestimated,  an  issue 
which does not emerge with other gender gaps, which are 
instead easily measured, at least in developed countries.

Second, which types of costs should be included may be 
a matter of discussion. While most studies include provision 
of  services  (health,  legal,  specialised)  and  lost  economic 
output, only some also include the personal (physical and 
emotional) impact on the victim. The rationale for including 
the  personal  impact,  for  EIGE  (2014),  is  that  it  is  included 
in  fields  which  compete  for  resources  with  gender-based 
violence. However, it is also the most difficult to account for. 
The choice of which items should be included may lead to 
different evaluation of the costs.

Third,  violence  against  women  is  defined  as  ‘any  act  of 
gender-based  violence  that  results  in,  or  is  likely  to  result 
in,  physical,  sexual  or  psychological  harm  or  suffering  to 
women,  including  threats  of  such  acts,  coercion  or  arbi-
trary deprivation of liberty, whether occurring in public or 
in private life’ (United Nations, 1993, Art. 1), perpetrated by 
an intimate partner (former or current), in the household, 
or  in  the  community,  namely  by  non-household  mem-
bers. However, most studies focus on violence committed 
by partners (intimate partner violence, IPV), which is only 
a subset of gender-based violence (GBV), because data for 
the former are often of better quality (EIGE, 2014). Attention 
should be paid to which of the two is considered in order to 
understand additional differences among the studies.

2.7.1.  The economic costs of gender­based 

violence

The most comprehensive and best informed report on the 
costs of violence against women is EIGE (2014). After a dis-
cussion of the most important studies on the theme, EIGE 
chooses seven domains to be included in order to estimate 
the  costs,  and  the  recommended  models  (which  mainly 
draw on UK experience).

2. The economic benefits of gender equality in different policy areas

(i)  Lost  economic  output:  days  of  lost  productivity  of 
paid and unpaid labour (multiplied by the number of 
IPV  homicides  and  survey-based  estimates  of  the  ex-
tent of violence).

(ii)  Health:  physical  injuries  and  long-term  mental  and 
physical health impacts, which are reflected in immedi-
ate treatments and longer-term treatments. Their cost 
is  estimated  using  the ‘health  losses’  models,  namely 
the time spent in less than hypothetical perfect health 
because  of  exposure  to  gender-based  violence,  as 
quality of life years (QALY) losses.

to cost EUR 28.4 billion (EUR 32.6 billion for total GBV), of 
which 59 % is due to the physical and emotional impact. 
The extrapolated data for the EU are: EUR 109.1 billion for 
IPV against women (EUR 122.2 billion for total IPV) and EUR 
225.8 billion for GBV against women (EUR 258.7 billion for 
total GBV).

In comparison with the following studies, EIGE (2014) esti-
mates the cost of IPV (GBV) as follows: for France, EUR 14.1 
(EUR  29.2)  billion;  for  Italy,  EUR  12.8  (EUR  26.6)  billion;  for 
Denmark EUR 1.2 (EUR 2.5) billion; and for Sweden EUR 2.1 
(EUR 4.2) billion.

(iii)  Legal sector: (a) criminal justice costs (e.g. police ser-
vice  costs,  legal  aid,  court  cost,  prosecution  costs,  fo-
rensic  services,  prison  costs,  conditional  sentencing, 
etc.): costs estimated using a model for the econom-
ic analysis of crime (percentage proportions of crime, 
stratified  by  severity)  and ‘no-crime’  (police  workload 
in  which  the  police  have  been  called  to  respond  to 
an  incident  that  was  deemed  not  to  meet  the  legal 
threshold  of  a  criminal  offence);  (b)  civil  justice  costs, 
estimated with a proportional expenditure approach.

A  number  of  other  studies  try  to  estimate  the  cost  of  in-
timate  partner  violence  or  gender-based  violence  at  the 
national  level. The  main  differences,  with  respect  to  EIGE 
(2014)  and  among  the  studies  themselves,  are  the  items 
included  (both  in  the ‘general’  item,  and  in  the  sub-items 
included for each category). Often some items are not in-
cluded simply because necessary data are missing. In add-
ition, the methodology followed to estimate the cost may 
change slightly (item cost per violence, multiplied by num-
ber of cases; estimation of total costs, etc.) (42).

(iv)  Social welfare: housing aid, financial assistance, child 

protection and family support.

The main results for the annual costs of IPV in some of the 
Member States of the EU are summarised below:

(v)  Personal  costs:  damage  to  property,  enhancing 
phone security, moving expenses, home repossession, 
legal costs, lone parenting: estimated using unit costs 
from administrative data or research, multiplied by the 
number of people reporting occurrence of those acts.

(vi)  Specialised  services:  victim-centred 

interpersonal 
intervention  (refuge,  telephone  helplines,  victim  sup-
port centres, counselling and advocacy) and specialist 
government intervention (coordinating functions). The 
cost  is  estimated  considering  the  total  expenditure 
(administrative data).

 ■ GBP  22.8  billion  for  England  and Wales  in  2001  (Wal-
by,  2004),  decreasing  to  GBP  15.7  in  2008  (Walby, 
2009) thanks to a decrease in domestic violence. The 
estimates  include  the  criminal  justice  system  costs, 
physical  and  mental  health  costs,  social  services  and 
child-related costs, housing costs, civil legal costs, lost 
output, and human and emotional costs.

 ■ SEK 2.7-3.3 billion for Sweden in 2004 (Envall and Eriks-
son, 2010), a figure which includes healthcare services, 
criminal justice system costs, victim support, social ser-
vices, the social insurance system and production loss.

(vii) Physical and emotional impact: cost of QALY health 
loss  per  incident  (multiplied  by  the  number  of  IPV 
homicides and survey-based estimate of the extent of 
violence).

 ■ EUR  2.5  billion  for  France  in  2006  (Nectoux  et  al., 
2010), including healthcare, social and justice services, 
production  loss,  and  some  human  costs  (rape  and 
prejudice).

The cost is estimated for the UK (2012), which has one of 
the best statistical systems on gender-based violence, and 
then  extrapolated  for  each  Member  State  and  the  entire 
EU  on  the  basis  of  the  population.  EIGE  estimates  a  cost 
of EUR 13.7 billion resulting from IPV against women (EUR 
15.4 billion for total IPV), 48 % of which is due to the phys-
ical and emotional impact, 15 % to criminal justice system 
costs, 12 % to lost economic output, and the rest divided 
among the other items. GBV against women is estimated 

(42) 

A different approach is followed by Santos (2013), who estimates 
the cost of domestic violence in the UK. She uses individual data 
on  self-reported  life  satisfaction  and  estimates  a  life  satisfaction 
regression  equation  on  income  and  domestic  violence.  The 
individual  cost  of  domestic  violence  is  extrapolated  using  the 
marginal  rate  of  substitution  with  respect  to  household  income. 
Santos estimates that past experiences of domestic violence costs 
around GBP 27 000 to the woman victim, while current exposure to 
domestic violence costs her around GBP 73 000.

Economic benefits of gender equality in the European Union 47

EIGE2. The economic benefits of gender equality in different policy areas

The annual costs of GBV in the EU in national studies have 
been estimated at:

2.7.2. 

Indirect impacts

 ■ GBP 40.1 billion per year in England and Wales in 2006-
2007 (Järvinen et al., 2008), including all the previously 
mentioned costs of domestic violence, but also costs 
of  sexual  violence,  violence  against  minority  ethnic 
women, prostitution and trafficking.

 ■ EUR 17 billion for Italy in 2006 (Intervita, 2013), includ-
ing  health  and  mental  health  costs,  criminal  justice 
costs,  police  costs,  specialised  centres,  productivity 
loss, and loss of quality of life.

 ■ EUR 70 million for Denmark in 2009 (Helweg-Larsen et 
al., 2010), including health services, police and judicial 
system  costs,  specialised  centres,  short-term  produc-
tion losses, and prevention.

Outside  Europe  (43),  IPV  has  been  estimated  to  cost  per 
year:

 ■ USD 5.8 billion for the US in 1995 (National Center for 
Injury Prevention and Control (NCIPC), 2003), a figure 
which includes direct medical and mental healthcare 
services, lost productivity (paid and unpaid labour and 
lifetime earnings for victims of homicide).

 ■ USD 8.1 billion for Australia in 2002-2003 (Access Eco-
nomics, 2004), a figure which includes pain, suffering 
and  premature  death,  reduction  in  potential  living 
standards,  production-related  costs,  consumption-re-
lated  costs,  second-generation  costs,  administrative 
and other costs and transfer costs. The National Coun-
cil to Reduce Violence against Women and their Chil-
dren (NCRVAW&C) (2009) estimates the cost of GBV for 
Australia at USD 13.6 billion (in 2007-2008).

 ■ USD 4.8 billion for Canada in 2009 (Zhang et al., 2012), 
a figure which includes the costs of the criminal and 
civil  justice  system,  healthcare,  mental  health  issues, 
productivity  losses,  personal  costs,  intangible  costs 
(loss of quality of life due to pain, suffering and anxiety).

 ■ CHF 164-287 million for Switzerland in tangible costs 
(police and justice system, support services, specialist 
agencies, healthcare costs, lost productivity) and CHF 
2 billion in intangible costs (loss of quality of life due 
to pain, suffering and anxiety) (Stern et al., 2013).

Violence against women may have an indirect effect on GDP, 
since  it  affects  other  outcomes,  such  as  women’s  employ-
ment and wages, and health. Bowlus and Seitz (2006) do not 
find that domestic violence has any causal effect on employ-
ment. On the contrary, Sabia et al. (2010) show that sexual 
violence against women is associated with 6.6 % lower prob-
ability of labour force participation and 5.1 % lower wages. 
These effects partially arise due to stress disorders and phys-
ical health consequences of violence (but not entirely).

According to the World Health Organisation (WHO) (2013), 
women  who  have  been  victims  of  intimate  partner  vio-
lence have higher rates of health problems: they are 16 % 
more likely to have a low-birth-weight baby; twice as likely 
to have an abortion; and twice as likely to experience de-
pression. Women who have been victims of sexual violence 
by a non-partner are 2.3 times more likely to have alcohol 
use disorders and 2.6 times more likely to experience de-
pression or anxiety. As mentioned above, health problems 
are one of the channels which impact on the labour market 
outcomes of abused women.

2.7.3.  Reducing gender­based violence: 

a virtuous circle

Finally,  gender-based  violence  is  considered  a ‘manifesta-
tion of historically unequal power relations between men 
and women … and it is one of the crucial mechanisms by 
which women are forced into a subordinate position com-
pared to men’ (United Nations, 1993). This quotation sum-
marises the fact that GBV not only reinforces gender differ-
ences (as we have just seen), but that it itself is one of the 
consequences  of  economic  inequalities.  Violence  against 
women  is  affected  by  the  relative  bargaining  power  of 
women: as such, it is influenced by economic inequalities.

Aiser (2010) develops a household bargaining model that 
incorporates  domestic  violence:  the  prediction  is  that  in-
creasing a woman’s relative wage increases her bargaining 
power within the couple and lowers the level of violence. 
Interestingly,  what  matters  is  the  potential  relative  wage, 
and  not  the  actual  absolute  wage. There  is  an  important 
implication:  improving  the  labour  market  conditions  for 
women will decrease the overall level of domestic violence, 
even  in  families  where  the  woman  does  not  work.  Using 
administrative data for California for the 1990-2003 period, 
Aiser shows that closing the gender wage gap by 3.6 per-
centage points (real change) explains 9 % of the reduction 
in violence against women observed during the period.

(43) 

A substantial body of literature also concerns developing countries. 
Please refer to the reviews by the Council of Europe (2012) and by 
Duvvury et al. (2013).

Research  carried  out  by  Anderberg  et  al.  (2015)  refers  to 
the  same  theoretical  framework.  Empirically,  the  authors 

48

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

show that: (i) an increase in men’s unemployment (+ 1 p.p.) 
reduces  domestic  violence  (-  3  %);  (ii)  an  increase  in 
women’s  unemployment  (+  1  p.p.)  increases  domestic 
violence (+ 3 %); and (iii) an increase in total unemployment 
has  no  effect  on  domestic  violence.  They  use  both  OLS 
regressions and instrumental variable techniques to address 
endogeneity issues. Similarly, Bowlus and Seitz (2006) show 
that employment acts as a significant deterrent.

It can thus be concluded that reducing economic inequal-
ities can reduce domestic violence and thus decreases its 
costs to the economy. In turn, this may have an additional 
positive effect for the economy of the country. Furthermore, 
reducing violence against women improves women’s em-
ployment and wages, and thus creates a virtuous circle that 
is positive for both women and society as a whole.

2.8.  The impact of health on economic 

outcomes

2.8.1.  Background

In almost all western countries, women experience longer 
life expectancy but higher rates of disability, more chronic 
debilitating  illness,  particularly  in  later  life,  and  poorer 
health than men (the so-called male-female health-survival 
paradox). This paradox is explained by both biological and 
environmental differences that include behavioural, cultural,  
and social factors (Case and Paxson, 2005; Oksuzyan et al. 
2010).

Women are less frequently hospitalised and less frequent-
ly therapeutically treated compared to men, particularly 
when it comes to diseases traditionally perceived as men’s 
diseases (the so-called ‘Yentl syndrome’, see Healy, 1991). 
Women are less or not at all represented in experiments 
for  introducing  new  drugs  and/or  new  diagnostic  and 
therapeutic  technologies.  Similarly,  many  research  stud-
ies on prevention, diagnostic methods and intervention 
have been conducted in exclusively male populations; as 
a  consequence,  physicians  might  incur  problems  in  the 
correct and timely diagnosis of diseases in women (Healy, 
1991).

The  role  of  health  on  the  economic  development  of 
societies is widely acknowledged. There is a great deal of 
literature, starting from the model developed by Grossman 
(1972), where investments in health are analogous to other 
forms  of  investment  in  human  capital  such  as  education. 
Literature  findings  document  a  positive  relationship 
between  various  measures  of  health  and  labour  supply, 
employment, wages or income (Strauss and Thomas, 1998; 
Smith, 1999; Haveman et al., 1995).

However, identifying the direction of the causal relationship 
is not straightforward. Causality can run in both directions. 
As income grows, individuals invest more in human capital, 
including health. On the other hand, considering health as 
one dimension of human capital, improvements in health 
will entail returns in the labour force. Healthier workers are 
more  productive  and  command  higher  hourly  earnings. 
Much of the literature linking health and labour market out-
comes focuses on developing countries, because the link 
between health and work appears more significant in so-
cieties in which many prime age adults are in poor health.

2.8.2.  Potential channels through which 

reducing the gender gap in health may 
affect macroeconomic performance

According  to  Bloom  et  al.  (2015),  there  are  four  channels 
through  which  reducing  the  gender  gap  in  health  may 
yield  positive  economic  outcomes:  (i)  healthy  women 
have  higher  labour  force  participation  rates  for  any  given 
level  of  education;  (ii)  better  health  (lower  morbidity  and 
mortality) increases the returns on educational investments 
and  thus  productivity;  (iii)  better  health  of  mothers 
directly  affects  the  health  of  children,  thereby  improving 
development prospects over the long run  through direct 
intergenerational  transmission  of  human  capital;  and 
(iv)  better  women’s  health  may  lower  fertility  and  thus 
youth  dependency  with  a  further  cumulative  effect  on 
women’s labour participation and educational investments. 
Although the latter channel appears to matter the most for 
developing countries, the other three channels are relevant 
for developed countries as well.

As pointed out by Currie and Madrian (1999), the empirical 
evidence  suggests  that  health  has  a  pervasive  effect  on 
most labour market outcomes including wages, earnings, 
labour  force  participation,  hours  worked,  retirement,  job 
turnover  and  benefits  packages.  However,  there  is  no 
consensus  about  the  magnitude  of  the  effects  or  about 
their  size  relative  to  the  effects  of  other  variables.  This  is 
because many studies do not deal with measurement error 
and the endogeneity of health. Furthermore, estimates of 
the effects of health on labour supply are relatively sensitive 
to  the  measure  used.  In  addition,  they  also  highlight  the 
lack  of  studies  that  analyse  gender  differences  in  labour 
market  behaviour  as  a  response  to  health  shocks.  In  fact, 
relatively few studies examine women and men separately, 
making  it  difficult  to  make  generalisations  about  gender 
differences where studies refer to the whole population or 
to men only (44).

(44) 

Luft  (1975)  is  one  of  the  earliest  papers  to  distinguish  between 
women and men when presenting the results; many early papers 
(Bartel and Taubman, 1979; Berkowitz et al., 1983) involved analysis 
of men only.

Economic benefits of gender equality in the European Union 49

EIGE2. The economic benefits of gender equality in different policy areas

Box 1.2  Most used measures of health

Another important issue in this field relates to the measurement of health (Currie and Madrian, 1999). Studies use 
different measures of health:

(i)  self-reported health status (usually ranked as excellent, good, fair or poor health);

(ii)  limitations on the ability to work; problems with activities of daily living;

(iii)  the presence of chronic and acute conditions; the utilisation of medical care;

(iv) clinical assessments of mental health or alcoholism;

(v)  nutritional status (e.g. height, weight, or body mass index);

(vi) expected or future mortality.

While studies on developing countries often focus on measures of nutritional status, the majority of studies on more 
developed countries focus on self-reported health status, health limitations, or utilisation of medical care.

Different studies focus on the relationship between health 
and wages. For instance, Strauss and Thomas (1998), using 
the National Longitudinal Survey of Youth, show a strong 
and positive correlation between adult height and hourly 
wages in the US and Brazil in the 1970s. Messer and Berger 
(2004), using the US Health and Retirement Survey, find that 
permanent adverse health conditions reduce both wages 
(8.4  %  for  men  and  4.2  %  for  women)  and  hours  worked 
(6.3 % for men and 3.9 % for women).

Other  studies  analyse  the  impact  of  poor  health  on  the 
probability  of  experiencing  unemployment  spells.  García-
Gómez  and  López-Nicolás  (2006)  analyse  the  effects  of 
a health shock on the probability of leaving employment 
and  moving  to  unemployment  or  inactivity  within  the 
Spanish population. They find that suffering a health shock 
decreases the probability of remaining in employment by 
5 % and increases the probability of transiting into inactivity 
by 3.5 %. Similar results are also found for other European 
countries (García-Gómez, 2008).

Böheim and Taylor (2000) use calendar data from the first 
seven  waves  of  the  British  Household  Panel  Survey  to 
analyse transitions from unemployment to part-time work, 
self-employment and economic inactivity for a sample of 
British  workers.  Their  results  show  that  the  existence  of 
a health condition that limits the type or amount of work 
observed before an unemployment spell doubles the exit 
rate from unemployment into economic inactivity.

Concerning  the  different  effect  of  health  on  the  labour 
market outcome of women and men, Gomez et al. (2010) 
find that an individual’s own health is an important deter-
minant of employment transitions and that there are sig-
nificant  differences  between  women  and  men.  They  use 

data from the first 12 waves of the British Household Panel 
Survey  (1991-2002)  and  measure  health  by  health  limita-
tions, a constructed latent health index and a measure of 
psychological well-being. Their results show that health af-
fects exits out of and entries into employment and that the 
effects are higher for men than for women.

A different group of studies has focused on the role played 
by health in retirement transitions. These studies show that 
decreases  in  health  status  are  among  the  main  causes  of 
retirement among older workers (Disney et al., 2006; Zuc-
chelli et al., 2007). All other things being equal, decline in 
health status may reduce the probability of continued work 
for three reasons (Disney et al., 2006): poor health may raise 
the disutility of work; poor health reduces the returns from 
work via lower wages and by entitling individuals to non-
wage income, through disability benefits; and poor health 
may act as an incentive to exit the labour market.

2.8.3.  The role of maternal and reproductive 
health on macroeconomic performance

An important strand of the literature concerns maternal and 
reproductive health. Reproductive, maternal, newborn and 
child health (RMNCH) is fundamental to development, and 
is  reflected  in  the  Sustainable  Development  Goals  (SDG)  
3  (Ensure  healthy  lives  and  promote  well-being  for  all  at 
all ages) and 5 (Achieve gender equality and empower all 
women and girls). For western countries, existing literature 
has  investigated  the  impact  of  improved  maternal  health 
on different economic outcomes.

Albanesi and Olivetti (2009) showed that improved maternal 
health was critical to the rise in the labour force participation 
of married women during the 20th century and especially 

50

Economic benefits of gender equality in the European Union

2. The economic benefits of gender equality in different policy areas

during  the  baby  boom,  generating  a  rise  in  income  per 
capita of over 50 % via this channel. These results suggest 
that  improving  maternal  health  may  have  long-lasting 
effects  on  standards  of  living,  even  without  a  decline  in 
fertility. Albanesi (2012) found that large maternal mortality 
reductions  in  25  advanced  and  emerging  economies 
between  1900  to  2000  were  associated  with  a  boom-
bust  pattern  in  fertility  and  a  permanent  rise  in  women’s 
human capital. Finally, Albanesi and Olivetti (2014) conduct 
an  empirical  study  of  the  impact  of  maternal  mortality 
reduction on fertility and women’s educational attainment, 
exploiting its variation across US states and cohorts. Their 
findings  suggest  that  the  growth  in  fertility  was  highest 
for US states and cohorts of women that experienced the 
greatest  reduction  in  maternal  mortality.  Moreover,  they 
show that the decline in pregnancy-related mortality had 
a sizeable impact on the rise in the women-men differential 
in college graduation.

Other studies have focused on the role of oral contracep-
tion (‘the pill’). Studies in this field, seeking to identify any 
causal  effects  of  the  pill  on  outcomes  for  young  women 
in the US in the 1960s and 1970s, have relied on a natural 
experiment arising from state differences in confidential ac-
cess to the pill for unmarried women under the age of 21.

Goldin and Katz (2002) present evidence for the impact of 
the  pill  on  young  women’s  career  decisions  and  on  mar-
riage rates in the 1970s. They argue that the introduction 
of the pill to young and unmarried women loosened the 
trade-off between family and working career. The pill fur-
ther reduced the cost of career investment for women by 

serving to increase the age at first marriage for a large frac-
tion of all young people. Thus, the role of the pill in affecting 
women’s careers was magnified by its impact on the age at 
first marriage.

Subsequent work has extended this framework to produce 
additional evidence on the ‘power of the pill’. Hock (2008) 
and  Ananat  and  Hungerman  (2012)  show  that  access  to 
the pill affected college enrolment and education and that 
access to contraception at younger ages improved the eco-
nomic resources and long-run outcomes of children born. 
Bailey (2006) shows that early access to the pill increased 
women’s  labour  force  attachment;  Zuppan  (2012)  docu-
ments the role of the pill on increased marital stability.

Bailey, Hershbein and Miller (2012) show that legal access 
to the pill had broad effects on lifetime wage earnings and 
that 30 % of the convergence of the gender wage gap in 
the US in the 1990s can be attributed to the increased legal 
availability of the pill.

Albanesi and Olivetti (2015) find that improvements in ma-
ternal health were critical to the joint evolution of married 
women’s  participation  and  fertility  in  the  US  during  the 
20th  century. They  show  how  a  decline  in  maternal  mor-
tality induces a temporary rise in fertility and a permanent 
rise in women’s human capital. These findings suggest that 
medical  progress  can  provide  an  integrated  explanation 
for  the  secular  decline  in  fertility  —  the  baby  boom  and 
bust — as well as for the overall rise in human capital and 
the gains in women’s human capital relative to men in the 
post-war period.

Economic benefits of gender equality in the European Union 51

EIGE2. The economic benefits of gender equality in different policy areas

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Economic benefits of gender equality in the European Union 61

EIGE3. 
Annex: 
Selected 
methodological 
approaches

3. Annex: Selected methodological approaches

Building  on  the  results  of  the  literature  review  at  EU  and 
MS  levels,  the  study  team  selected  five  examples  to  be 
reviewed in greater depth and explored how they compare 
to the E3ME model and can inform the subsequent phases 
of  the  study.  The  EU  and  MS  literature  review  served  as 
a long list of potential examples, and a short list of examples 

was developed based on several criteria, focusing on added 
value in terms of methodology and learning effects.

The  criteria  that  were  used  in  the  selection  process  are 
summarised in the table below.

Criteria for selection of good practice examples

Name of 
criterion

Nature of criterion

Type of 
criteria

Examples of types of  
questions to assess criterion

Methodological 
illustration

Methodological 
robustness

Examples must illustrate different methodological 
approaches that identify economic benefits of 
gender equality. The following approaches were 
the most relevant for this:

–  macroeconomic model with single or 

multiple equation systems;

–  micro-econometric analysis (including 

experimental and quasi-experimental studies);

–  other econometric analysis (such as  

meta-analysis);

– 

impact assessments/cost–benefit analysis.

Examples chosen must have considered bias in 
their analysis and adopted clear approaches to 
eliminate them. This relates for example to:

–  statistical significance of results;

–  correct identification of channel through 
which gender equality affects economic 
outcomes;

– 

– 

– 

inclusion of all relevant control variables;

treatment of deadweight;

issues with causality;

–  controlling for result bias;

–  multicollinearity;

– 

robustness checks.

 ■ What methodological approach 
and type of measurement does 
the example represent?

Core

 ■ How established is the method 

used in the body of the literature?

 ■ How innovative is the method-
ology used in the body of the 
literature?

 ■ Does the example clearly identify 
any potential bias in terms of 
methodological approach and 
analysis?

Core

 ■ Have the identified biases been 

assessed and addressed?

 ■ How robust are the method-

ologies used compared to the 
current body of research in this 
area?

Economic benefits of gender equality in the European Union 63

EIGEEIGE3. Annex: Selected methodological approaches

Name of 
criterion

Nature of criterion

Type of 
criteria

Examples of types of  
questions to assess criterion

Learning 
effects — Key 
links between 
gender equality 
and economic 
benefits

Example demonstrates important connection be-
tween gender equality and economic outcomes 
for overall population or specific sub-groups in 
one of the following areas of gender equality:

–  education;

– 

– 

– 

labour market;

time use;

leadership;

–  violence against women;

–  health;

–  migration.

Core

 ■ Does the example demonstrate 
a certain type of connection be-
tween gender equality and a cer-
tain type of economic benefit?

 ■ Can it be used as a ‘best of its 

kind’ to represent the particular 
connection between gender 
equality and economic benefits?

Examples illustrate how to link gender equality to 
macroeconomic outcomes. The examples should 
demonstrate the following:

– 

– 

the main types of macroeconomic indicators 
used for modelling of impacts of gender 
equality;

Core

links between microeconomic and 
macroeconomic evidence;

Learning ef-
fects — Identifi-
cation of effects 
of gender equal-
ity at macroeco-
nomic level

–  magnitude of impacts of gender equality at 

macroeconomic level.

Examples chosen must consider if economic 
benefits of gender equality are sustainable and 
inclusive. This can be done, for example, through 
assessing if gender equality leads to:

–  poverty reduction;

–  more equal income distribution;

–  better living conditions;

–  more environmentally friendly choices;

–  one-off change or sustained change.

Core

Learning 
effects — Sus-
tainability and 
inclusiveness

 ■ What types of macroeconomic 

indicators does the example use 
to demonstrate impacts of gen-
der equality on macroeconomic 
outcomes?

 ■ How does the example incorpor-
ate microeconomic evidence into 
macroeconomic modelling?

 ■ What size of macroeconomic 

effects does the example identify?

 ■ How does the example measure 
inclusiveness and sustainability of 
the economic impact of gender 
equality?

 ■ What main effects in terms of 

sustainability and inclusiveness 
does the example illustrate?

64

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

The  selected  examples  were  analysed  in  depth  and  the 
findings  were  presented  in  a  standardised  template. The 
detailed presentation of the examples follows the criteria 
used in the selection and described in the previous table, 
namely:

 ■ description  of  the  example:  context;  gender  equality 
problem addressed; variable used to measure gender 
equality; aims and objectives; data sources; indicators 
used  to  demonstrate  the  macroeconomic  impact  of 
gender equality; analytical method used;

 ■ key characteristics;

 ■

eligibility in relation to selection criteria: methodological 
illustration; methodological robustness; learning effects; 
geographical representativeness;

 ■ lessons learnt: outcomes and results; methodological 

considerations; and lessons for future research.

The  following  table  summarises  the  key  characteristics  of 
the five selected examples, which are presented in detail in 
the subsequent sections.

Overview of the five selected methodological examples

Methodological 
example

Macroeconomic 
indicator

Evidence of economic 
impact

Description of 
empirical approach

Labour market —  
Participation

Mitra et al. (2015)

GDP per capita 
growth rate

‘Gender equality and 
economic growth: is it 
equality of opportunity 
or equality of outcomes?’

Labour market — 
Participation, self­
employment and 
entrepreneurship

Cuberes and Teignier 
(2016)

‘Aggregate effects of 
gender gaps in the labor 
market: a quantitative 
estimate’

Income per capi-
ta and aggregate 
productivity

Regression analysis

(Framework of a stand-
ard growth model, with 
additional measures 
of gender equality, 
with a single equation 
model).

Data used:

World Development 
Indicators (WDI) data 
1985-2000

Theoretical model, sim-
ulation and estimates.

Data used:

Data from OECD Social 
and Welfare Statistics 
and ILO for 2010 or 
latest available year

Increasing gender equal-
ity improves the growth of 
GDP per capita.

A standard deviation im-
provement in the equality 
of opportunity increases 
growth by 1.30 percent-
age points, and a standard 
deviation improvement 
of equality of outcomes 
improves growth by 1.19 
percentage points.

Exclusion of women from 
entrepreneurship and 
from the labour market 
would generate income 
per capita loss.

The average income loss 
due to gender gaps is 
14.1 % to 15.4 % (short-/
long run). The income 
loss due to the gaps in 
entrepreneurship and 
self-employment is about 
5 % to 5.7 %.

Economic benefits of gender equality in the European Union 65

EIGE3. Annex: Selected methodological approaches

Methodological 
example

Macroeconomic 
indicator

Evidence of economic 
impact

Description of 
empirical approach

Labour market — 
Participation

Esteve-Volart (2009)

Per capita output Exclusion of women from 

entrepreneurship and 
from the labour market 
would generate output 
per capita loss.

An increase in the ratio of 
women-to-men man-
agers in one unit would 
lead to a 319 % increase 
in per capita income. An 
increase in the ratio of 
women-to-men workers 
is associated with a 153 % 
increase in per capita 
income.

Firms affected by the 
Norwegian law introduc-
ing quotas in the board-
rooms of listed companies 
undertook fewer work-
force reductions than 
comparison firms, increas-
ing relative labour costs 
and employment levels 
and reducing short-term 
profits.

Comparing workers who 
move from the same clos-
ing plant to the same new 
firm (after a plant closure), 
there are larger losses 
among women than men. 
There is a significantly 
smaller gap in hiring firms 
with female leadership.

Theoretical model and 
estimates with a regres-
sion and IV.

Data used:

Census of India + coun-
try-level data for the 
1961-1991 period

Quasi-natural exper-
iment (diff-in-diff 
estimation)

Data used:

Firm-level data set on 
Nordic firms from 2003 
to 2009

Survey analysis (OLS, 
FE — with the inclu-
sion of plant fixed 
effects — estimations).

Data used:

Employee-, plant- and 
firm-level US data set 
on from 1993 to 2001

‘Gender discrimination 
and growth: theory and 
evidence from India’

Economic deci­
sion­making — 
Leadership

Matsa and Miller (2013)

‘A female style in corpo-
rate leadership? Evidence 
from quotas’

Firms’ policies 
(in particular, 
employment 
decisions)

Economic deci­
sion­making — 
Leadership

Tate and Yang (2015)

‘Female leadership and 
gender equity: evidence 
from plant closure’

Wage policies of 
firms

66

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

3.1.   Methodological example 1: Labour market — Participation

Section

Field

Key  
characteristics

Tool: Mitra A., Bang J. T., and Biswas A., ‘Gender equality and economic growth: is it equality of oppor-
tunity or equality of outcomes?’, Feminist Economics, Vol. 21(1), 2015, pp. 110-135.

Internal identifier: Mitra et al. (2015)

Countries covered: 101 countries (including European countries).

Year of publication: 2015

Researchers: Aniruddha Mitra (Bard College, NY, USA), James T. Bang (St. Ambrose University, Iowa, 
USA), Arnab Biswas (University of Wisconsin-Stout, WI, USA).

Analytical methods:

- 

- 

Exploratory factor analysis;

Macroeconomic model with single equation (regression analysis).

Gender equality area:

Education, labour market, leadership.

Measures:

- 

(inverse) fertility rate;

-  gender gap in literacy;

-  gender gap in secondary enrolment;

-  gender gap in labour force participation;

-  percentage of women in parliament.

Time period: 1985-2000 (non-overlapping 5 year periods).

1. Methodological illustration

The paper discusses methodological concerns and explains the strategies used to address them, with 
a clear description and investigation of every aspect.

The methods used are well known in the econometric literature; however, some of them have not 
been used before in articles investigating the economic benefits of reducing the gender gap in par-
ticipation. In that sense, their usage is innovative.

The example covers a large number of gender equality areas.

2. Methodological robustness

Eligibility in 
relation to se­
lection criteria

The example clearly identifies potential bias with a standard single equation regression and addresses 
them:

-  accounting for multiple aspects of gender inequality in a single empirical model: solved with 

exploratory factor analysis;

-  endogeneity and unobserved heterogeneity: which could be dealt with by means of the differ-

ence GMM estimator (see Arellano and Bond, 1991);

- 

serial correlation within panels: solved with non-overlapping 5 year averages of variables and 
including some lagged variables;

-  underestimated standard errors: calculated heteroscedasticity-consistent robust standard errors 

using a jackknife technique and clustering.

In addition, the authors address some possible concerns arising from their choices, and assess the 
robustness of the results to different specifications, which indeed confirm the results.

Economic benefits of gender equality in the European Union 67

EIGE3. Annex: Selected methodological approaches

Section

Field

3. Learning effects

The example describes important connections between gender equality and economic outcomes 
in several areas of gender equality (education, labour market, leadership), with a section devoted to 
‘conceptual foundations’. It then explores these connection with the methodology described above. 
With respect to the paper investigating the connection between gender equality in employment and 
macroeconomic benefits, it addresses issues in terms of multicollinearity and endogeneity raised in 
previous papers (e.g. it made improvements with respect to Klasen and Lamanna, 2009).

Eligibility in 
relation to se­
lection criteria

The only macroeconomic outcome used is economic growth (including a set of controls which are 
known to improve economic growth). Economic growth is measured with the average growth rate 
of GDP per capita. The magnitude of the impacts is described in terms of standard deviations, which 
helps understanding and comparison.

However, the example does not link microeconomic and macroeconomic evidence, and it does not 
measure the inclusiveness and sustainability of the economic impact of gender equality. Moreover, it 
discusses the channel through which gender equality improves macroeconomic outcomes, though 
an underlying theoretical model is missing.

4. Geographical representativeness

The paper covers a large pool of countries (101), including all or most MS. The list of coun-
tries included is available as a supplemental table at: http://www.tandfonline.com/doi/
suppl/10.1080/13545701.2014.930163

Context

Mitra et al. (2015) explore the impact of gender equality on economic growth, building on previous 
literature, which has emerged as an area of inquiry in recent decades. While the number of studies 
which assess the impact of gender equality in education on economic growth is large and increasing, 
fewer studies have explored the consequences of gender inequality on employment. Those which 
have can be separated into a group which provides projections/simulations, and a group that 
has investigated the effects using the growth model developed by Barro (1991) and co-authors 
(Barro, 1991; Barro and Sala-i-Martin, 1995; Barro and Sala-i-Marin, 2004), augmented with measures 
of gender inequality. The present paper belongs to the latter group. With respect to previous 
studies, Mitra et al. (2015) address the multidimensionality of gender equality and issues related to 
endogeneity and unobserved variables.

Description of 
the example

Gender inequality addressed

The authors investigate the impacts of gender inequality in education, in employment and in political 
outcomes.

Variable used to measure gender equality

To do so, the authors consider five indicators of gender equality: the inverse of adolescent fertility rate, 
the gender gap in literacy, the gender gap in secondary enrolment, the gender gap in labour force 
participation, and the percentage of women in parliament.

Gender gaps in literacy and secondary enrolment capture constraints on skills investments; the gen-
der gap in labour force participation captures the consequences of biased resources allocation and 
the restrictions on women’s access to employment; the inverse of the adolescent fertility rate captures 
fertility aspects of gender bias; the percentage of women in parliament captures the role of women in 
designing social policy.

68

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3. Annex: Selected methodological approaches

Section

Field

Aims and objectives

Description of 
the example

The study aims at investigating the impact of gender equality on economic growth in a cross-national 
context.

With respect to other studies, the paper is based on the assumption that gender equality is 
multidimensional, and that the various aspects may differ in their consequences. Considering only 
one of those aspects may lead to omitted variable bias. On the other hand, including all of them 
may be challenging, due to the high degree of collinearity. Thus, the paper intends to investigate the 
impact of gender equality in several fields on economic growth, addressing multicollinearity.

Data sources

WDI; Women in National Parliament Dataset (Inter-Parliamentary Union)

Indicators used to demonstrate the macroeconomic impact of gender equality

Annual growth rate of GDP per capita.

Analytical method used

1.  The impact of gender equality on economic growth is tested in the framework of a standard 
growth model, with additional measures of gender equality explored with a single equation 
model.

The dependent variable is the average growth rate of GDP on non-overlapping 5 year periods 
(the 5 year periods ending in 1990, 1995 and 2000). Standard control variables included are: the 
log of GDP at the end of the previous period; the growth rate of GDP during the previous period; 
investment; government consumption; inflation rate; and secondary completion rate. In addition, 
there are two independent variables which assess the impact of gender equality.

2.  To account for multiple aspects of gender inequality in a single empirical model, Mitra et al. (2015) 
use EFA. This methodology is based on the assumption that each variable is generated by a linear 
combination of a smaller set of latent factors, which include common factors (which impact more 
than one observed variable) and specific factors (which are unique to each variable). EFA uses the 
common factors identified, which lend themselves to theoretical interpretation; in addition, they 
are free from a high degree of multicollinearity; lastly, they are less prone to measurement errors.

The factors identified are equality of opportunity (secondary enrolment gap, inverse of the 
fertility rate, partial literacy rate gap) and equality of outcomes (labour force participation gap 
and percentage of women in parliament).

3.  To address endogeneity and unobserved heterogeneity, Mitra et al. (2015) employ the ‘difference 
GMM’ estimator (Arellano and Bond, 1991). This estimates the model in first differences, instru-
menting the current differences with their lagged values, and uses the generalised method of 
moments (GMM).

4.  To address serial correlation issues in panels, the authors consider non-overlapping 5 year 
averages of the variables and include lagged values of the growth rate of GDP and lagged 
values of log per capita GDP.

5.  To have correct standard errors, they use a jackknife technique (Davidson and McKinnon, 1993) 

and clusters by country.

6. 

In addition, they perform a number of sensitivity checks: they replace the total completion rate 
with male secondary completion rate, or exclude it completely; they test if results are robust to 
different choices of control variables; and they replicate the estimation for a balanced panel (45 
countries).

Economic benefits of gender equality in the European Union 69

EIGE 
 
3. Annex: Selected methodological approaches

Section

Field

Outcomes and results

Lessons learnt

Mitra et al. (2015) find that a standard deviation improvement in the equality of opportunity 
increases growth by 1.30 percentage points (statistically significant at 5 %), and that a standard 
deviation improvement of equality of outcomes improves growth by 1.19 percentage points 
(statistically significant at 5 %).

The other variables have the sign predicted by the growth theory.

To assess the impact on OECD countries, the authors use two strategies: in the first one, they separate 
the sample of OECD and non-OECD countries, and estimate the same model. They then interact the 
variables equality of opportunity and equality of outcomes with OECD countries. In both cases, 
they find that only gender equality in outcomes has a significant impact for OECD countries: a standard 
deviation improvement in equality of outcomes improves economic growth by 1.51 p.p. (statistically 
significant at 10 %) or by 1.91 p.p. (statistically significant at 5 %), depending on the specification.

Their results are robust to different sensitivity checks.

Methodological considerations and lessons for future research

The paper by Mitra et al. (2015) is a fundamental one in the literature on the economic benefits of 
gender equality.

First of all, it addresses the issue of multiple aspects of gender equality, suggesting a way to include 
them without incurring multicollinearity. The approach of EFA seems to be a good tool for future re-
search in order to include several aspects of gender equality in one regression. A disadvantage is the 
fact that each single aspect of gender equality cannot be disentangled when EFA is exploited.

In terms of endogeneity, the difference GMM estimator seems to be a good approach in this strand 
of the literature. Nevertheless, looking for external instruments to exploit is still necessary, to confirm 
these results with slightly different approaches.

The methodological rigour and the discussion of potential pitfalls and their solution are per se a good 
example to be followed by future papers.

However, a GMM approach (difference GMM or system GMM) could not be applied in the present 
study in view of the high degree of heterogeneity in terms of labour market and economic structure 
across Member States. This approach would be suitable only in the case of either a set of countries 
(e.g. Nordic countries), which have plenty of similarities, or a selection of sectors which have similar 
behaviour across countries.

Some highlights that can be drawn from a comparison between E3ME and the GMM technique are 
listed below:

 ■ E3ME comprises several sets of behavioural equations which capture the dynamics of a single unit 
(e.g. ‘agriculture’ sector, ‘mining and quarrying’ sector, etc.), while panel data techniques are more 
suitable to model an equilibrium and identify common trends across the units.

 ■ E3ME is estimated by applying cointegration techniques, which allow for the estimation of 

a cointegrating relationship, along with a short-run model which incorporates an error-correction 
term that shows the percentage of disequilibrium between the long-run and the short-run 
models which is eliminated in each period. This adjustment between the long and the short run 
cannot be captured by using other econometric techniques.

70

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

Feminist Economics, Vol. 21, Issue 1, 2015

http://www.tandfonline.com/doi/full/10.1080/13545701.2014.930163

Aniruddha Mitra

Bard College — Economics Programme

30 Campus Rd, Annandale-on-Hudson, NY 12504, USA

Email: amitra@bard.edu

James T. Bang

St. Ambrose University — Department of Finance, Economics, and Decision Science

518 West Locust Street, Davenport, Iowa 52802, USA

Email: BangJames@sau.edu

Arnab Biswas

Sources

University of Wisconsin-Stout — Department of Economics

712 South Broadway, Menomonie, WI 54751, USA

Email: biswasa@uwstout.edu

Notes on contributors

James T. Bang is Professor of Economics at St. Ambrose University in Davenport, Iowa, and teaches 
courses on microeconomics, econometrics, international economics and the economic analysis of 
institutions. His research explores the topics of gender discrimination, international migration and 
institutions, with a focus on their impacts on developing countries.

Arnab Biswas is Assistant Professor of Economics at the University of Wisconsin-Stout, where he 
teaches courses in microeconomics. His research has focused on discrimination in housing markets, 
as well as topics related to discrimination and economic development.

Aniruddha Mitra is Assistant Professor of Economics at Bard College in Annandale-on-Hudson, New 
York, where he teaches courses on microeconomics and migration. His research investigates the phe-
nomena of discrimination, conflict and international migration.

Economic benefits of gender equality in the European Union 71

EIGE3. Annex: Selected methodological approaches

3.2.   Methodological example 2: Labour market — Participation, self­employment 

and entrepreneurship

Section

Field

Tool: Cuberes, D. and Teignier, M., ‘Aggregate effects of gender gaps in the labor market: a quantitative 
estimate’, Journal of Human Capital, Vol. 10(1), 2015, pp. 1-32.

Internal identifier: Cuberes and Teignier (2016)

Countries: 33 OECD countries (including EU countries); separate analysis for 106 non-OECD countries.

Year: 2016

Researchers: David Cuberes (Clark University, MA, USA), Marc Teignier  
(Universitat de Barcelona, Spain).

Key 
characteristics

Analytical methods:

- 

theoretical model;

-  quantitative assessment of the model;

- 

cross-country analysis (simulation).

Gender equality areas:

Labour market, leadership.

Measures:

-  exclusion of women from the labour market;

-  exclusion of women from entrepreneurship.

Years: OECD countries: 2010; non-OECD countries: last available years (1987-2011).

1. Methodological illustration

The paper dedicates a large amount of space to explain and discuss the theoretical model, which 
predicts the economic impacts of gender inequality in access to entrepreneurial activities and to the 
labour market. The theoretical implications of the model are also quantified. The effects are assessed 
with separated cross-country analyses for a sample of OECD and non-OECD countries.

Eligibility in 
relation to se­
lection criteria

The theoretical model follows Lucas (1978), with some differences. As an innovation, Cuberes and 
Teignier (2016) add self-employment on top of employers and workers and include exogenous fric-
tions that affect only women.

2. Methodological robustness

First, the empirical results are derived from the theoretical hypotheses, facilitating understanding of 
the mechanisms and interpretation of the results.

Second, the empirical model is simulated separately for OECD and non-OECD countries, reducing the 
bias which may arise by pooling countries with different levels of development.

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3. Annex: Selected methodological approaches

Section

Field

3. Learning effects

Eligibility in 
relation to se­
lection criteria

Description of 
the example

This paper shows a clear positive connection between gender equity (in entrepreneurship and the 
labour market) and income per capita. On the one hand, if all women were excluded from entrepre-
neurship, the income per capita would decrease by a sizeable 10 % in the short run. On the other 
hand, if all women were excluded from the labour force, the income per capita would decrease by as 
much as 47 % in the short run.

Due to the methodological robustness (theoretical model) and its interesting implications, this paper 
is considered a good reference.

The macroeconomic indicators used to explain the economic benefits of gender equality are income 
per capita and aggregate productivity.

This paper incorporates microeconomic reasoning into macroeconomics by developing  
a micro-founded theoretical model.

Results from this paper show that increasing women’s participation in the labour market has marked 
benefits in terms of poverty reduction and growth.

4. Geographical representativeness

The example covers all or most of the EU countries. It covers all the EU countries that in 2010 were 
OECD members in the OECD sample. Some of the EU countries are in the non-OECD sample, gener-
ating potential difficulties in interpreting the results (e.g. they are in a very large sample of countries, 
including ones with different levels of development).

Context analysis

Cuberes and Teignier (2016) investigate the impact of gender gaps in entrepreneurship and the 
labour force on aggregate productivity and income per capita.

They build on previous literature, which shows the negative effects of gaps in the labour force and 
in education on a country’s economic performance. There are also theoretical papers that show the 
impact of gender inequality on economic growth, and most are based on fertility and a child’s human 
capital channels. In contrast, the authors of this paper focus on the talent pool channel. Moreover, 
they also calibrate and simulate the theoretical framework to produce reasonable estimates of the 
costs. The most similar studies are Esteve-Volart (2009), which focuses more on developing countries 
and tests the prediction of the model with a cross-country regression, but without providing 
estimates of the economic costs, and Hsieh et al. (2013), which examines the allocation of talent and 
US economic growth.

The model used by Cuberes and Teignier (2016) is based on the span-of-control framework by Lucas 
(1982), adding self-employment and gender inequality in access to entrepreneurial activities and to 
the labour market. In addition, as a further extension, they introduce the possibility of out-of-necessity  
self-employment when the model is extended to developing countries.

Gender equality problem addressed

In the example, women face exogenous restrictions on their occupational choices. There are three 
types of constraints: (i) a fraction of women are excluded from entrepreneurship; (ii) an additional 
fraction of women are excluded from self-employment; and (iii) a fraction of women are completely 
excluded from the labour market.

Variable used to measure gender equality

In the empirical section, these restrictions are measured by the labour force participation by gender, 
the fraction of employers by gender, and the fraction of the self-employed by gender.

Economic benefits of gender equality in the European Union 73

EIGE3. Annex: Selected methodological approaches

Section

Field

Aims and objectives

Description of 
the example

The paper aims to examine the quantitative effects of gender gaps in entrepreneurship and labour 
force participation on aggregate productivity and income per capita. To do so, it develops a theoretical 
model, extending an existing framework and, predicts the quantitative effects of a complete exclusion 
of women from employment or managerial positions. It also quantifies the effects of existing labour 
market gender gaps in a large group of developed and developing countries.

Data sources

OECD Social and Welfare Statistics and ILO.

Indicators used to demonstrate the macroeconomic impact of gender equality

Income and aggregate productivity.

Analytical methods used

First of all, Cuberes and Teignier (2016) develop a theoretical model to assess the implications of gen-
der gaps in the labour market, then simulate the effects of a complete gap, and finally estimate the 
income loss in OECD and non-OECD countries.

1.  The model follows the span-of-control framework of Lucas (1978). Agents have an entrepreneurial 
talent x, depending on which they can choose to become either firm workers, with wage w, or 
entrepreneurs, who earn the profits of the firm they manage. In the latter case, they can decide to 
be self-employed or employers. If x is smaller than the cutoff z1 agents become workers, otherwise 
self-employed or employers. They become employers if x is also larger than a second cutoff z2 .  
The model assumes that women and men are identical, but that women face exogenous 
restrictions: a fraction are excluded from entrepreneurship, while among those who remain 
a fraction are excluded from self-employment, and a third fraction are also excluded from 
the labour market. The paper does not provide justification for these restrictions: they can be 
discrimination, difference in supply factors, or differences in optimal choices by the individual.

  Women who do not participate in the labour market produce zero output, causing an output loss, 
which is likely to be larger than the real one, since home production is not taken into account 
(thus it can be considered a ceiling). Frictions in the number of employers and of the self-
employed also affect total output, by reducing the occupational cutoffs.

2.  To simulate the model, firstly the authors set the parameters: some are taken from the literature, 
some are set to meaningful values and some are calibrated to match the real fraction of employ-
ers and self-employed (e.g. parameters of talent distribution). The three gender gaps are coun-
try-specific. The paper presents two numerical results, in the short run and in the long run. In the 
short run, capital is constant, while in the long run the capital stock is negatively affected by the 
introduction of gender gaps.

3.  The first simulation provides the effects if (i) all women were excluded from entrepreneurship, but 
not from self-employment, if (ii) they were all excluded from self-employment (and entrepreneur-
ship), and if (iii) they were also completely excluded from the labour force. With the gender gaps, 
the efficient allocation of talent and resources is distorted, thus there is a decline in aggregate 
income per worker and per capita.

4.  Finally, for each OECD country, Cuberes and Teignier (2016) compute the parameters associated 

with the gender gap, comparing the female and male data on labour force participation, share of 
employers, and shares of the self-employed population.

5.  The model is also extended to make it more suitable for developing countries, introducing the 

possibility of out-of-necessity self-employment (i.e. those who choose self-employment because 
they have no other option). There is evidence suggesting that the fraction of the self-employed is 
much larger in developing countries and that they often choose this occupation because there is 
no better alternative (Poschke, 2013). Cuberes and Teignier (2016) then use data from non-OECD 
countries to quantify the effects of gender gaps in developing contexts.

74

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

Outcomes and results

1.  Model implications

Lessons learnt

(a)  An increase in the entrepreneurship gender gap decreases the labour demand and the 
equilibrium wage, decreasing the cutoff z1 and, indirectly, z2, i.e. decreasing the talent of 
entrepreneurs and the self-employed.

(b)  An increase in the self-employment gender gap increases the labour supply, and thus 

decreases wages. Again, this decreases both z1 and z2.

2.  Maximum possible effects of the gender gaps

(a)  If all women were excluded from entrepreneurship (but not from self-employment), the 

income per capita loss would be 7.1 % in the short run and 8.6 % in the long run.

(b)  When all women are also excluded from self-employment, the negative effect would be 

10.1 % to 11 % (respectively, in the short and long run).

(c)  Finally, when all women are excluded from the labour market, income per capita decreases by 

46.8 % to 50 %.

3.  Effects in OECD and non­OECD countries

(a)  The average labour force participation gap in OECD countries is 0.22. The entrepreneurship 

gap is 0.43 and the self-employments gap is 0.18.

(b)  The average income loss due to gender gaps is 14.1 % to 15.4 % (short/long run). The income 
loss due to the gaps in entrepreneurship and self-employment is about 5 % to 5.7 %. Italy is 
the OECD country with the largest average loss (21.2 %).

(c)  The average total loss in non-OECD countries is 16 % to 17.5 %; however, there are large differ-
ences, depending on the region. Non-OECD European countries have an average loss of 4.8 % 
to 5.4 % due to entrepreneurship and self-employment gaps, and an income loss of 9.8 % to 
10.8 % due to all the gender gaps taken together. Thus even if the models are slightly differ-
ent (and not entirely comparable), the effects in non-OECD European countries seem even 
smaller than in OECD countries. It should be noted, however, that OECD countries also include 
non-European ones (e.g. Mexico and Turkey). The region with the largest income loss, as one 
might expect, is the MENA (35 % to 38 %).

When merging OECD and non-OECD, an inverse-U relationship emerges between the level of 
development of a country and the total income loss due to gender gaps, consistent with Goldin 
(1990). The relationship is negative when considering income loss due only to entrepreneurship 
gender gaps.

Methodological considerations and lessons for further research

This paper represents a good starting point for understanding the consequences of gender inequal-
ity. However, several limits and possible extensions are worth mentioning.

(a)  The empirical analysis focuses on OECD and non-OECD countries. However, for the purpose of this 

project, it would be interesting to perform this analysis on Europe only.

(b)  The theoretical framework does not model the decision of agents to participate in the labour 

market or any differential aspect in the occupational choices of women. An interesting extension 
would be to introduce a household production sector in the model.

(c)  The paper does consider either sectoral differences in terms of female labour intensity or differ-

ences in terms of entrepreneurial talent between women and men (possibly due to gender gaps 
in education).

(d)  A further possible extension would be to include effects on human capital choices, as in Este-

ve-Volart (2009).

Economic benefits of gender equality in the European Union 75

EIGE3. Annex: Selected methodological approaches

Section

Field

Lessons learnt

Drawing attention to the comparison between E3ME and the methodology employed by Cuberes 
and Teignier (2016), the following issues need to be mentioned.

 ■ A similarity between any modelling exercise which is implemented in E3ME and the present aca-

demic article is that in both cases short-run and long-run effects are modelled.

 ■ However, an advantage of cointegration techniques is that they provide a ‘measure’ of the speed 
of the adjustment between the short run and the long run. The cointegrating relationship is an 
equilibrium relationship in the sense that it seeks to capture the long-run relationship between 
a set of variables. However, policy interventions sometimes take time to have effect and for the 
economy to adjust back to its long-run position, so understanding and being able to identify the 
short-run adjustment process is also useful.

http://www.journals.uchicago.edu/doi/full/10.1086/683847

NB: The paper previously circulated under the titles ‘Gender inequality, factor allocation, and aggre-
gate productivity’ and ‘Gender gaps in the labour market and aggregate productivity’.

David Cuberes

Associate Professor

Department of Economics

Clark University

950 Main Street

Worcester, MA 01610

Tel. (508) 793-7237

Sources

Email: dcuberes@clarku.edu

https://sites.google.com/site/davcuberes/

Marc Teignier

Assistant Professor

Universitat de Barcelona, Facultat d’Economia i Empresa

Avgda. Diagonal 690, 08034 Barcelona, Spain

Tel. (+ 34) 934 021 989 (ext. 372341)

Email: marc.teignier@ub.edu

http://www.marcteignier.com/

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3. Annex: Selected methodological approaches

3.3.   Methodological example 3: Labour market — Participation

Section

Field

Tool: Esteve-Volart, B. (2009), ‘Gender discrimination and growth: theory and evidence from India’, 
available online at http://bertaev.info.yorku.ca/files/2016/06/disc_january2009.pdf

Internal identifier: Esteve-Volart (2009)

Country covered: India

Year of publication: 2009 (NB: not published — last available version).

Researcher: Berta Esteve-Volart (York University, Toronto, Canada).

Key 
characteristics

Analytical methods:

- 

theoretical model;

-  macroeconomic model with single equation (regression analysis).

Gender equality areas:

Labour market, leadership.

Measures:

-  exclusion of women from the labour market;

-  exclusion of women from managerial positions.

Time period: 1961-1991.

1. Methodological illustration

Eligibility in 
relation to  
selection 
criteria

The paper dedicates a large amount of space to explaining and discussing the theoretical model, 
which predicts the economic impacts of gender inequality in access to managerial positions and to 
the labour market. The implications of the theoretical model are assessed with a panel regression on 
Indian states.

The theoretical model follows Rosen (1982), with some differences. As an innovation, Esteve-Volart 
(2009) considers the implications of gender discriminations in the previous model (Rosen, 1982). 
The empirical model that Esteve-Volart applies as a standard is not particularly innovative, but is well 
established. In addition to previous research, she also considers the impact of the gender gap on 
human capital accumulation, and not only on macro outcomes. Moreover, to address endogeneity 
concerns, the author proposes instrumental variables.

The example covers two gender equality areas within the field of the labour market.

2. Methodological robustness

First, the empirical results are supported by the theoretical predictions, helping in understanding the 
mechanism and interpreting the results.

Second, the empirical model controls for variables that are known to affect the output and to reduce 
the risk of omitted variable bias. Other unobserved heterogeneities are addressed using country fixed 
effects (taking advantage of the panel dimension of the data). Finally, Esteve-Volart (2009) discusses 
the importance of assessing causality, and to do so she uses instrumental variables.

Fixed effects regressions have already been used in this literature (e.g. Klasen, 1999; Klasen and 
Lamanna, 2009). On the other hand, the instrumental variable approach is commonly used to assess 
a causal relationship, and it has already been used to estimate a causal impact of gender equality in 
education on economic growth. However, Esteve-Volart is the first to propose and use an instrument 
for gender equality in labour market participation (ratios of women-to-men primary and middle 
school teachers). A pitfall is that the instrument proposed has scarce applicability in the context of 
developed countries, where the ratio of teachers favours women. It may also reflect job segregation 
by gender more than women’s access to the labour market.

Economic benefits of gender equality in the European Union 77

EIGE3. Annex: Selected methodological approaches

Section

Field

3. Learning effects

Eligibility in 
relation to  
selection 
criteria

Description of 
the example

The example provides theoretical and empirical support that gender inequality in labour market 
participation and in access to managerial positions have a detrimental effect on economic growth, 
per capita GDP, and on women’s education, increasing the gender gap in education. This last point is 
interesting, as it shows that gender gaps in the labour market and in education are highly correlated. 
However, a pitfall of the paper is that it does not control for gender equality in education and in other 
areas; it is thus potentially prone to omitted variable bias.

With respect to other papers, it has the advantage of providing a theoretical example to interpret 
and evaluate the empirical results. A positive aspect of the example is that it also discusses — and 
excludes — the possibility that the positive effect on GDP arises from a simple accounting fact (e.g. 
women becoming visible by working in the labour market instead of at home), something that 
should also be taken into account by future research.

Finally, it also discusses the reasons that may cause the persistence of gender discrimination.

4. Geographical representativeness

The implications of the model are tested only on India. An advantage is that the model can also be 
tested on different countries (e.g. European countries).

Context analysis

Esteve-Volart (2009) investigates the impacts of gender discrimination in the labour market and in 
managerial positions on per capita GDP and human capital investment. She builds on previous liter-
ature. In particular, the model is based on a model by Rosen (1982), adding the dimension of gender 
(in)equality. As pointed out by the author, there are papers using models to study the link between 
inequality in human capital and earnings and economic growth. They investigate the interaction 
between labour and fertility, in a context of developing countries: reducing the gender gaps would 
reduce fertility and thus increase growth. In contrast, Esteve-Volart (2009) does not investigate the link 
via fertility, focusing on impacts beyond fertility and child rearing and providing a complementary 
explanation of the effects (allocation of talent). An additional advantage of the model proposed by 
Esteve-Volart is that it can be used to investigate the effects of other types of discrimination.

Gender inequality addressed

Esteve-Volart (2009) analyses the impacts of gender discrimination in the labour market and in access 
to managerial positions: exogenous social norms exclude women from certain positions or from the 
overall labour force.

Variable used to measure gender equality

To do so, in the empirical section the author considers the women-to-men ratios of workers and 
managers (a subset of workers).

Aims and objectives

The example aims at investigating if social norms that restrict women’s employment have economic 
consequences, acting as a brake on economic development. To do so, it develops a theoretical model 
and tests the implications with an empirical analysis of India.

Data sources

Official estimates in India: Census of India; estimates of state domestic product; education in India; 
annual surveys of industries.

Indicators used to demonstrate the macroeconomic impact of gender equality

Per capita output.

78

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

Analytical methods used

First of all, Esteve-Volart (2009) develops a theoretical model to assess the implication of gender 
discrimination in the labour market. She then tests the implications for India, which is a developing 
country where women’s labour participation stands at 22 %.

1.  The model follows Rosen (1982): there is an economy where each firm is run by one manager, 
who employs workers. In addition, in Rosen’s model individuals can work in home production. 
Individuals are born with a given endowment of skills (managerial talent, productivity as a worker, 
productivity as a home worker) and can optimally choose either to become a manager or 
a worker. In addition, they can invest in human capital to improve their skills. If they decide to be 
workers, they can acquire primary education to improve their skills (and thus wage); those who 
become managers should acquire primary education, and can also acquire higher education 
(improving their profit at a certain cost). Home production does not improve with education. 
Managerial talent is distributed uniformly among women and men. An individual decides 
from managerial job, a working position, or home production (never chosen in the absence of 
discrimination). The decision of becoming a manager depends on talent, given that the profit 
obtained is a function of skills.

Description of 
the example

There are three factors that determine growth: (i) the average quality of ideas (due to the 
entrepreneurial talent of managers — innovation); (ii) the average worker productivity (adoption); 
and (iii) residual factors, determined by the education of people in home production.

2. 

In the empirical section, Esteve-Volart (2009) tests the implication of her model for a developing 
country, using data from 16 Indian states (95 % of the population). To estimate the results, Este-
ve-Volart run a state fixed effects regression, where the dependent variable is either the log of 
(non-agricultural) state domestic product (impact on economic growth) or the women-to-men 
literacy ratio (impact on human capital). The independent variable of interest is the women-to-
men ratio of non-agricultural workers and of managers. In addition, the author controls for human 
capital, population growth, the ratio of urban population, the ratio of capital to labour, and year 
fixed effects.

3.  To address endogeneity issues, Esteve-Volart further estimates the results with an instrumental 

variable approach. She uses the ratio of women-to-men primary and middle school teachers as an 
instrument, which, according to the author, is a proper instrument as long as it does not directly 
affect per capita output. Rather, it is a proxy for the cultural values of gender roles.

4.  The author also estimates the basic results (OLS) by sector, to assess the impact on the agricultural, 

manufacturing and tertiary sectors.

5.  Finally, Esteve-Volart tests whether the results are robust to several sensitivity checks.

Economic benefits of gender equality in the European Union 79

EIGE 
3. Annex: Selected methodological approaches

Section

Field

Outcomes and results

1. Model implications

Lessons learnt

A prediction of the model is that a decline in wages decreases the talent of managers (the incentive 
to become a manager also increases for less talented ones). The implications that are of interest to us 
are the following.

(a)  Gender discrimination in managerial positions (partial discrimination): for developed countries, 
where wages tend to be high, there is no effect on education; in developing countries, with low 
wages, partial discrimination lowers female education. In the latter case, discrimination against 
women implies lower economic growth (lower education > lower productivity > lower wages 
> lower cutoff of talent). The consequences for economic growth in developed countries are not 
discussed, but it seems that there should be no effect.

(b)  Gender discrimination in the labour market (total discrimination): average female education 
is lower than the absence of discrimination and lower than male education (women have no 
incentive to invest in education). As a consequence, there is lower economic growth, due to the 
residual part of growth, which depends on education. There is also lower per capita GDP, since 
women engage in home production, which is less productive.

(c)  In the context of the unitary model of the household, discrimination should not persist (total 

household income is lower). Discrimination may persist in a bargaining framework (e.g. Lundberg 
and Pollak, 1993) or in an identity approach (gender jobs associations) (Akerlof and Kranton, 2000). 
Another explanation is assortative mating with a comparative advantage related to men working 
outside the home. Finally, a possible channel is fertility, which increases women’s comparative 
advantage in home production.

2. Empirical results

Gender inequality in access to labour or to managerial positions negatively affects economic 
development.

(a)  An increase in the ratio of women-to-men managers in one unit (from 100 % men to 50-50) 
would lead to a 319 % increase in per capita income (582 % with instrumental variables).

(b)  An increase in the ratio of women-to-men workers is associated with a 153 % increase in per 

capita income (464 % with instrumental variables).

a)  Larger effects with the instrumental variable approach suggest that in India the relationship be-

tween income and women’s labour force participation may be negative: poor women engage in 
worker activity and the social norm is binding. Thus, endogeneity may even bias the coefficients 
downwards.

b)  In addition, the author confirms the effect on education: the women-to-men ratio of managers 

and the women-to-men ratio of workers have a positive effect on women-to-men literacy (with IV, 
the effect is significant).

c) 

In the agricultural sector, there is no effect (men tend to have a physical advantage, thus more 
gender equality in the agricultural sector may not lead to better outcomes).

d)  The larger effects are found in the tertiary sector, where talent is more important than physical 

ability.

The results are robust to different specifications, and the author discusses and excludes the possibility 
that they are simply an accounting effect.

80

Economic benefits of gender equality in the European Union

Section

Field

3. Annex: Selected methodological approaches

Lessons learnt

Methodological considerations and lessons for further research

The paper by Esteve-Volart (2009) is an interesting example, as it provides both theoretical and empir-
ical support to the findings. In addition, in the empirical section the author assesses if the effects are 
causal, using an instrumental variable approach.

However, a number of drawbacks arise in terms of the purpose of this project. First, the theoretical 
model and the most important predictions are for developing countries. In order to extend the author’s 
findings to developed countries, such as the EU’s Member States, the implications of the model should 
be further discussed and analysed: most of the theoretical conclusions stem from the notion that in 
a situation where discrimination is present, women would invest less in education, but this is not the 
case in the EU. Indeed, the gender gap in education in the EU has favoured women in recent times, 
particularly in higher education. An appropriate model for developed countries should also account 
for this fact and explain the trend, in a context where there are nevertheless gender gaps in both 
employment and in managerial positions.

Finally, the instrument proposed (women-to-men teacher ratio) may not be appropriate in a context 
such as that of the EU where the number of women employed as teachers is high, in particular in 
primary schools. Indeed, in the EU a large number of women teachers may reflect job segregation by 
gender more than women’s access to the labour market. However, the women-to-men ratio in dif-
ferent jobs, less prone to gender segregation, could also be used as an instrumental variable among 
developed countries.

In terms of the comparison between E3ME and Esteve-Volart’s (2009) approach, the following issues 
need to be considered.

 ■ The cointegration technique which is used to estimate the E3ME equations is more suitable than 
a fixed effects regression to capture the behaviour of the economy through time. In other words, 
the estimation of individual behavioural equations by means of cointegration is the most ap-
propriate technique to model the evolution of time series which are non-stationary, while fixed 
effects are appropriate when the cross-sectional dimension is longer than the time dimension of 
the sample under consideration.

 ■ A fixed effects regression will be more suitable to model an equilibrium between several variables.
 ■ E3ME provides results in the case of 69 industries, while Esteve-Volart (2009) distinguishes only 

three broad sectors, i.e. the agricultural, manufacturing and tertiary sectors.

 ■ Esteve-Volart (2009) applies OLS to estimate individual models for each sector. OLS is not a suita-
ble econometric technique if the time series under consideration has a unit root. This is the case 
of many economic variables which are analysed over a long period of time, e.g. 44 years of data, as 
considered in the case of E3ME.

http://bertaev.info.yorku.ca/files/2016/06/disc_january2009.pdf

Berta Esteve­Volart

Associate Professor

Department of Economics, York University

Sources

Vari Hall 1066, 4700 Keele Street Toronto, ON, M3J 1P3, Canada

Tel. (416) 736-2100 Ext. 77029

Fax (416) 736-5987

Email: berta@econ.yorku.ca

http://bertaev.info.yorku.ca/

Economic benefits of gender equality in the European Union 81

EIGE3. Annex: Selected methodological approaches

3.4.   Methodological example 4: Economic decision­making — Leadership

Section

Field

Tool: Matsa, D., Miller, A., ‘A female style in corporate leadership? Evidence from quotas’, American 
Economic Journal: Applied Economics, Vol. 5(3), 2013, pp. 136-169.

Internal identifier: Matsa and Miller (2013)

Countries covered: Norway (and Nordic area).

Year of publication: 2013

Researchers: David Matsa and Amalia Miller.

Analytical methods: Micro-econometric methods (diff-in-diff; quasi-natural experiment).

Key 
characteristics

Gender equality area:

Leadership and labour market

Measures:

Percentage of women in boardrooms.

Time period: 2003-2009

Methodological illustration

Eligibility in 
relation to  
selection 
criteria

This paper uses a quasi-natural experiment provided by a law imposing quotas on boardrooms 
of publicly listed Norwegian companies to assess the impact of women’s leadership on corporate 
decisions.

This methodology is well established in the empirical microeconomic literature. However, this paper 
represents one of the first examples in the literature assessing the impact of women leaders on eco-
nomic outcomes.

Methodological robustness

This study broadly discusses any potential bias and concretely tries to solve it.

In particular, the major problem of endogeneity is the non-random distribution of women leaders 
across firms. It is solved by exploiting the quasi-natural experiment provided by the Norwegian law in 
the context of the diff-in-diff approach.

This methodological analysis is much more robust than other micro-econometric analyses, since 
it uses a ‘clean’ identification strategy, rather than more indirect methods such as the instrumental 
variable estimation.

Learning effects

This paper clearly shows that there is a connection between women leaders and employment out-
comes. In particular, women leaders are found to undertake fewer workforce reductions than com-
parison firms.

For the reasons set out above relating to methodological robustness, this paper can be considered as 
a ‘best of its kind’ study.

The outcome variable is employment, measured in terms of number of employees at the firm level 
(this is a microeconomic paper).

This paper does not directly deal with inclusiveness and sustainability issues. However, the results 
suggest that women’s leadership may have effects in terms of poverty reduction.

Geographical representativeness

This paper focuses on Norway (using other Nordic firms as comparison).

82

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

Context analysis

This paper is one of a number of studies aiming at identifying the economic effects of women’s lead-
ership (e.g. women managers, CEOs and board members) in the private sector.

Gender equality problem addressed

This paper focuses on gender equality issues in the top echelons of firms (namely boardrooms).

Variable used to measure gender equality

Percentage of women board members.

Aims and objectives

This paper focuses on the impact of women leaders on corporate policies, with a special focus on 
employment policies.

Data sources

The paper uses a panel data set on Nordic firms covering the period from 2003 to 2009. The data set 
is recovered from the Bureau Van Dyik’s Orbis database and covers comprehensive balance sheet 
information, as well as information on employment and on the composition of boardrooms.

Indicators used to demonstrate the macroeconomic impact of gender equality

Description of 
the example

Firms’ policies (in particular, employment decisions).

Analytical methods used

The main problem in the identification of the causal effect of interest relates to the fact that women 
leaders are most likely not randomly distributed across firms. In particular, the problem arises when 
the sorting of women leaders is somehow correlated with the nature of corporate policies carried out 
by the firm. A straightforward example may be represented by the firm culture. Indeed, firms that are 
naturally open to gender equity concerns may be more prone to employ a larger fraction of women 
leaders and, at the same time, may pursue employment policies that are more favourable to gender 
equality, or at least more focused on employees’ needs.

In order to solve this identification problem, a ‘clean’ strategy is to exploit some quasi-natural experi-
ment that exogenously shifts the amount of women leaders in the firms. With that exogenous source 
of variation, it is possible to assess the causal impact of women leaders, removing all the sources of 
bias stemming from sorting and unobserved heterogeneity.

This is what is done in this paper. In 2006, a law that introduced quotas (at the 40 % level) in the 
boardrooms of publicly listed companies was approved in Norway. The analysis compares the 
outcomes of ‘treated’ firms (publicly listed Norwegian firms) with comparable ‘non-treated’ firms 
(unlisted Norwegian firms and publicly listed and unlisted firms in other Nordic countries), using 
a classical diff-in-diff approach.

The paper uses a panel data set on Nordic firms covering the period from 2003 to 2009. The data set 
is recovered from the Bureau Van Dyik’s Orbis database and covers comprehensive balance sheet 
information, as well as information on employment and on the composition of boardrooms.

Economic benefits of gender equality in the European Union 83

EIGE3. Annex: Selected methodological approaches

Section

Field

Outcomes and results

Lessons learnt

This paper finds that most of the corporate decisions and outcomes were unaffected by the law. In 
particular, revenues and non-labour costs were substantially similar between treated and non-treated 
firms.

However, the paper documents notable differences in the employment policies of treated firms. In-
deed, firms affected by the quota undertook fewer workforce reductions compared to firms that were 
left unaffected. The paper estimates that this effect is large: affected firms increased their employ-
ment level by as much as 30 % more than comparable unaffected firms.

This has led to increased payroll costs and, consequently, to a decrease in short-run profits. The paper 
estimates that, after the quota, the ratio of operating profits to assets decreased by as much as 4 % 
more than within firms that were not hit by the law.

The paper also finds that such results are robust to a large number of different specifications and 
samples.

Moreover, the effects on employment policies are found to be larger in firms that had to add the 
most women employees to comply with the law, i.e. firms that were far below the 40 % level before 
the law came into force.

Interestingly, there is no evidence that the impact of the quota on corporate policies was due to 
something different from gender, such as the age and the experience of the newly hired (women) 
board members. Indeed, the paper finds the effect of quotas on workforce reductions to be similar 
for firms with older and more experienced board members after the quota compared to firms with 
younger and less experienced board members after the quota, suggesting that the effect found is 
indeed driven by gender.

The interpretation of the effect is in terms of different preferences between women and men, with 
women being more oriented to taking care of employees’ needs and, therefore, more prone to carry 
out labour-hoarding practices. In other words, they are more willing than men to not dismiss their 
employees even when it would be economically meaningful, such as when the firm is experiencing 
a period of economic downturn.

Methodological considerations and lessons for future research

Overall, this paper represents a solid study of the impact of women leaders on firms’ decisions and 
shows that instating equity between women and men at the top of firms is likely to have relevant 
economic benefits.

Panel data techniques are the methodology which has been used in the case of this microeconomic 
contribution. This methodology performs well in those cases where the cross-sectional dimension 
of the panel is longer than the time dimension. However, a similar approach would not be suitable 
to estimate the relevant parameters which are required to populate E3ME. In particular, 44 years of 
data are considered to estimate single behavioural equations in the case of each unit (e.g. sector, 
consumption category, population group, etc.). Another reason which prevents the use of panel data 
in the current study is the high degree of heterogeneity across the different countries and industrial 
sectors across the EU.

84

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

https://www.aeaweb.org/articles.php?doi=10.1257/app.5.3.136

David Matsa
dmatsa@kellogg.northwestern.edu

David Matsa is an Associate Professor of Finance at the Kellogg School of Management at North-
western University and a Research Associate at the National Bureau of Economics Research. Professor 
Matsa’s research focuses on connections between business and financial strategy and emphasises the 
importance of labour market frictions in the corporate environment. His recent research examines 
optimal corporate capital structure determination, concentrating on various strategic motivations vis-
à-vis the firm’s workforce, and on the role of managerial preferences in firms’ labour market and other 
strategies, including workforce hiring and downsizing decisions.

Sources

Amalia Miller
am5by@virginia.edu

Amalia Miller is an Associate Professor in Economics at the University of Virginia.

Her research interests include public finance, labour economics, health economics and industrial 
organisation. She has recently been involved in the analysis of the impact of women leaders on firms’ 
employment policies.

Economic benefits of gender equality in the European Union 85

EIGE3. Annex: Selected methodological approaches

3.5.   Methodological example 5: Economic decision­making — Leadership 

Section

Field

Tool: Tate, G., Yang, L., ‘Female leadership and gender equity: evidence from plant closure’, Journal of 
Financial Economics, Vol. 117, 2015, pp. 77-97 (43).

Internal identifier: Tate and Yang (2015)

Countries covered: US

Year of publication: 2015

Researchers: Geoffrey Tate and Liu Yang

Methods: Micro-econometric methods (OLS and FE estimations).

Key 
characteristics

Gender equality area: 

Leadership and labour market.

Measures:

Women leaders (defined as the percentage of women among the top five earners in the firm).

Time period: 1993-2001

Methodological illustration

This paper uses micro-econometric techniques to estimate the differences in wage changes 
experienced by women versus men workers displaced from closing plants and the impact of 
women’s leadership on such wage changes.

The empirical methods used are largely established and traditional.

Methodological robustness

This paper broadly discusses any potential bias and concretely tries to solve it.

Firstly, it uses involuntary displacement due to plant closure to address the potential endogeneity of 
job changes.

Moreover, it controls for differences in job choices between women and men by estimating a pair 
fixed effects model that compares workers moving from the same closing plant to the same new 
firm (i.e. diff-in-diff estimation).

Learning effects

This paper clearly shows a positive connection between gender equity in leadership positions and 
gender equity in the (totality of the) labour market.

It can be used as a ‘best of its kind’ study to represent such connection.

The outcome variable is gender equity, measured in terms of the gender differences in wage changes 
experienced by workers after a plant closure (measured at the microeconomic level).

This paper finds that women leaders significantly contribute to reducing wage drops associated 
with job losses among women workers. This, in turn, led to a more equal income distribution across 
gender.

Geographical representativeness

This paper focuses on the US.

Eligibility in 
relation to se­
lection criteria

86

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

Context analysis

This paper is one of a number of studies aiming at identifying the economic effects of women’s 
leadership (e.g. women managers, CEOs and board members) in the private sector.

Gender inequality addressed

This paper focuses on gender equality issues in the top echelons of firms (namely, the top five earners 
in the firm).

Variable used to measure gender equality

Women leaders (defined as the percentage of women among the top five earners in the firm).

Aims and objectives

This research represents a micro-econometric study on the economic effects of women leaders. It 
explores the impact of women leaders on gender equity using evidence from the plant closure. In 
particular, it measures how women leaders affect wage drops experienced by women versus men 
workers after an involuntary job loss.

This paper represents the first attempt to empirically assess this issue.

Data sources

The empirical analysis uses a worker-, firm- and plant-level data set for the US covering the 1993-2001  
period. The data set used in the analysis covers 461 449 workers in 9 244 closing plants covering 
23 states in the US.

Description of 
the example

Indicators used to demonstrate the macroeconomic impact of gender equality

Wage policies of the firms.

Analytical method used

The paper broadly deals with the identification issues.

In particular, the main problem is represented by the non-random distribution of jobs across gender.

Indeed, women may tend to have jobs which are more flexible, require a lower investment in human 
capital accumulation, and are characterised by a lower degree of competition and risk. If these 
differences in job choices between women and men are somehow related to the sorting of women 
into leadership positions, then it is hard to assess whether women leaders cause reductions in the 
pay disparity between women and men.

The paper takes several steps in order to solve this problem.

Firstly, in order to deal with the endogeneity of job changes, the focus is restricted to those job 
changes that are involuntary, that is to say, job changes stemming from plant closure. Indeed, if wom-
en and men change jobs at different points in time and at different rates (note that women tend to 
have higher turnover rates compared to men), their job would change differently, thus wage changes 
in those cases would be difficult to interpret.

Secondly, the paper corrects for the differences in job choices between women and men by estimating 
a pair fixed effects model that compares women and men who move from the same closing plant to 
the same new plant in the year following the plant closure. This paper thus estimates the diff-in-diff 
between women and men workers subjected to the same shock, that is, the plant closure followed by 
the same involuntary job change.

Economic benefits of gender equality in the European Union 87

EIGE3. Annex: Selected methodological approaches

Section

Field

Outcomes and results

The first finding is that displaced workers experience significant wage drops in the new job (i.e. the 
job after the plant closure).

The second finding is that women workers are associated with significantly larger (5 % more) wage 
drops than men workers.

The third finding is that wage drops experienced by women workers are significantly smaller 
(by 50 %) if the hiring firm is led by a woman.

Moreover, this result intensifies if the management team is in the great majority composed of 
women, suggesting that when the firm’s management is entrusted to women, they can more easily 
enforce their decisions.

Some ancillary findings are that the positive impact of women leaders is strongest for women in 
the middle of the age distribution and that it extends to women at the lowest ranks of the wage 
distribution.

Lastly, this paper finds that in multi-division firms it is the gender of the corporate CEO that matters 
and not the gender of the manager of the plant hiring the worker. Moreover, there are no significant 
differences in terms of wage drops if the hiring plant is the home division of the CEO or one of the 
firm’s other divisions. This casts light on the major role of culture as a mechanism behind the effect of 
women leaders, as opposed to differences in terms of local interactions between women workers and 
women leaders (e.g. initial wage negotiation).

Lessons learnt

Overall, this paper suggests that having women in leadership positions represents an important 
externality, since women leaders cultivate more gender-sensitive policies within their firms.

Methodological considerations and lessons for future research

In conclusion, this study represents an initial empirical attempt to assess the impact of women 
leaders on the wages of workers who have recently been made redundant. As highlighted above, 
this study deals appropriately with endogeneity issues. The novelty of the research question and the 
study’s focus on identification are the major reasons for choosing it as a ‘good practice’ example. In 
addition, the results are interesting and significantly contribute to our understanding of the economic 
benefits of women’s leadership.

In terms of the comparison between E3ME and Tate and Yang (2015), some key issues are discussed, 
as follows.

 ■ As discussed in methodological example 4, cointegration is a more suitable approach than a fixed 
effects regression to model the behaviour of the economy through time (see also methodological 
example 4 for further details).

 ■ As mentioned above, Tate and Yang (2015) apply OLS to estimate individual models which sup-

plement the fixed effects estimates. As pointed out in the case of methodological example 4, OLS 
is not an appropriate approach if the time series under consideration is non-stationary, i.e. I(1). 
Many economic variables which are analysed over a long period of time seem to be trended and 
non-stationary. These characteristics are present in the case of most variables which are modelled 
in E3ME.

88

Economic benefits of gender equality in the European Union

3. Annex: Selected methodological approaches

Section

Field

http://www.sciencedirect.com/science/article/pii/S0304405X1400018X

Geoffrey Tate
Geoffrey_Tate@kenan-flagler.unc.edu

Geoffrey Tate in an Associate Professor at the Kenan-Flagler Business School of the University of North 
Carolina at Chapel Hill.

His primary research interests are in the areas of empirical corporate finance and behavioural finance. 
His work explores the effect of managerial biases on corporate investment and financing decisions.

Sources

He also researches the composition of boards of directors and how it affects firm policies and per-
formance. His recent work studies the interaction between labour economics and organisational 
structure, focusing on the implications for individual workers.

Liu Yang
lyang@rhsmith.umd.edu

Liu Yang is an Assistant Professor in Finance at the Smith School of Business, University of Maryland.

Her research interests include theoretical and empirical corporate finance in the areas of mergers 
and acquisitions, corporate restructuring, corporate governance, labour economics and financial 
institutions.

Economic benefits of gender equality in the European Union 89

EIGEHOW TO OBTAIN EU PUBLICATIONS

Free publications:

(cid:127) 

one copy: 
via EU Bookshop (http://bookshop.europa.eu);

(cid:127)   more than one copy or posters/maps: 

from the European Union’s representations (http://ec.europa.eu/represent_en.htm);  
from the delegations in non-EU countries (http://eeas.europa.eu/delegations/index_en.htm);  
by contacting the Europe Direct service (http://europa.eu/europedirect/index_en.htm) or  
calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) (*).

(*) 

The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you).

Priced publications:

(cid:127) 

via EU Bookshop (http://bookshop.europa.eu).

 
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About the study 

The study on the ‘economic benefits of gender equality’ is unique in the EU context. It’s the first of its kind to 
use a robust econometric model to estimate a broad range of macroeconomic benefits of gender equality in 
several broad areas such as education, labour market activity and wages. 

The overall results of the study show that more gender equality would lead to: 

 ■ Between 6.3 million and 10.5 million additional jobs in 2050 with about 70 % of these jobs taken by women 
 ■ Positive GDP impacts that grow over time 
 ■ An increase in GDP per capita of up to nearly 10 % in 2050 

The  study  used  the  E3ME  macroeconomic  model  to  estimate  the  economic  impacts  of  improvements  in 
gender equality. E3ME is an empirical macroeconomic model tailored specifically to model outcomes at EU and 
Member State levels. 

The outputs of the study on economic benefits of gender equality in the EU include nine publications: 

1)  Literature review: existing evidence on the social and economic benefits of gender equality and methodological 

approaches 

2) EU and EU Member States overviews 
3) Report on the empirical application of the model 
4) How the evidence was produced: briefing paper on the theoretical framework and model 
5) How the evidence was produced: factsheet on the theoretical framework and model 
6) Economic impacts of gender equality in the EU policy context: briefing paper 
7) Economic impacts of gender equality: briefing paper 
8) How gender equality in STEM education leads to economic growth: briefing paper 
9) How closing the gender labour market activity and pay gaps leads to economic growth: briefing paper 

All publications, detailed study results and methodology can be found on EIGE’s website: http://eige.europa.eu 

http://eige.europa.eu