# **1. Introduction**

Women’s economic empowerment is not a new issue. It is at the heart of the Sustainable Development Goal 5 focused on achieving gender equality and empowering all women and girls. Over the years, empirical evidence has accumulated suggesting that growth with gender equality could result in substantial growth dividends (Kabeer and Natali, 2013). A recent report by McKinsey Global Institute (2015) estimates these dividends at $12 trillion by 2025; others assess the welfare gain of removing the gender participation gap at 20% (Ostry et al. 2018). A review of the literature by Kabeer and Natali (2013) reveals that this relationship holds most consistently with respect to the education and employment gaps across a variety of countries and time periods during the past half century. In addition, abundant micro-level evidence suggests that access to education and employment reduce the incidence of poverty while resources in women’s hands have a range of positive outcomes in terms of human capital (Quisumbing, 2003; Kabeer 2003, Dwyer and Bruce, 1988). Thus, there has been a broad realization that the economic inclusion of women is not only socially desirable, but it is also an integral and indispensable part of economic development,<sup>2</sup> contributing to the inclusiveness of growth and improving the distributional dynamics within households.<sup>3</sup> Nevertheless, women’s economic empowerment continues to challenge both governments and development assistance agencies. The good news is that progress has been made along an important dimension. The education gender gap has gotten smaller over the years (Figure 1). Women’s education attainment steadily increased in most countries up to 2010, driving the global average ratio of female-tomale attainment above 90% in 2010. Yet, the same cannot be said about the gender labor force participation gap. That same year the world average female-to-male labor force participation rate declined and has remained around 67% since then (see Figure 1). Gender earnings inequality is also a big issue. A recent World Bank report<sup>4</sup> estimates the cost of such inequality at an estimated $160.2 trillion.

A smaller education gender gap signals increases in human capital and the supply of skills which are essential for productivity and income growth. Yet, it also indicates that other gender-related distortions, especially the participation gap, have become prominent, imposing serious costs in terms of foregone potential growth (World Bank 2012). Ostry et al. (2018) show that the growth cost of failing to narrow the gender participation gaps may be larger than previously believed because male and female labor are found to be different and complementary in production. They conclude that studies which ignore the difference between male and female labor understate the positive effects of increased female labor force participation on growth and incorrectly attribute these gains to technology. They also point out that as economies get

> 2 See Duflo (2012), and World Bank (2010, 2012). 3 See Kabeer and Natali (2013). 4 Wodon and De La Briere (2018) Unrealized Potential: The High Cost of Gender Inequality in Earnings.

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