# 2.1 Trade and Gender - Theoretical Aspects

Theoretical underpinnings on the impact of trade liberalization on gender equitable effects has been predicted by the standard international trade theory (Hecksher-Ohlin-StolperSamuelson). According to the theory, countries that specialize in production and trade based on their relatively abundant factor endowment would benefit from trade. Trade liberalization in this case is expected to bring about increase in demand for the relatively abundant type of labor, which is relatively unskilled labor in developing countries and relatively skilled labor in developed countries. It may be noted that women workers generally comprise a disproportionately larger segment of the unskilled labor force in developing countries and to an extent in developed countries as well, this theory predicts employment gains for women in export sectors of developing countries and employment losses for women in developed countries. Moreover, in developing countries, women workers are expected to see a rise in their wages relative to men in skilled jobs and a decline in the gender wage gap. Conversely, for developed countries, disproportionate job losses for unskilled workers (women), and a widening wage gap between skilled (men) and unskilled (women) labor are expected. Thus, for developing countries, the theory predicts that trade expansion would increase the demand for women workers and close gender wage gaps. In this sense, trade liberalization impacts positively in developing countries and negatively in developed countries with respect to gender employment and wages.

## 2.1.1 Trade and Gender - Evidence using Single Country CGE

A study by Fontana and Wood (2000) quantitatively analyzed the gender dimension of trade liberalization in Bangladesh. Using a CGE model by constructing a gender-specific SAM (for the year 1985) with only three factors of production and five sectors, they simulated the impact of trade liberalization on women’s employment and wages. The authors found sharp expansion in the exporting manufacturing sectors with the reallocation of labor from agriculture to manufacturing sectors, resulting into increase in employment of women as well as their absolute and relative wages.<sup>7</sup> Thus, their results support the theory that trade liberalization would benefit unskilled female workers. However, the authors also highlight that though an expansion of manufacturing exports raises the wages of women, it also reduces their leisure.

Fofana et al. (2005) used a gender-aware CGE model to analyze the impact of fiscal policies and other external shocks such as trade liberalization on employment, income and welfare in South Africa. The simulation results showed that trade liberalization in South Africa would have a distinct positive effect on male employment and wages and a negative effect on female employment and wages. Similar results have been found by Fofana et al. (2003) for Nepal. Moreover, female entrance to the labor market is accomplished with a decrease of leisure time as men’s leisure time rises.

> 7 Bangladesh is relatively abundant in labor, and the garments industry accounts for 60 percent of export revenue.  More than 80 percent of employees in the sector are women.

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