Staying the course: The role of gender equality in fostering poverty reduction and economic development

In the face of deepening crises and dramatic reductions in development assistance, those who believe in gender equality and women’s rights need to stay the course by strengthening their coordination and redoubling their efforts. There is a long-standing body of experience and evidence demonstrating the critical importance of gender equality and women’s empowerment for economic development. We highlight below three reasons why focusing on gender equality is a strategic imperative for development.

Restating the business case: Gender equality is smart economics

First, while it may sound instrumentalist to some, the World Bank’s declaration that “gender equality is smart economics” recognizes the strong business case for countries to invest in creating an enabling environment for women’s economic empowerment. Extensive research shows that gender inequalities in human capabilities (health and knowledge) and opportunities (economic and political) are both unfair and inefficient. These inequalities hinder current and future efforts to reduce poverty, promote inclusive growth, and build resilience to shocks.

Gender inequalities constrain women’s access to product, labor, and financial markets, and reduce productivity in farms and enterprises. Closing gender gaps in farm productivity and wages in agrifood systems would boost global domestic product by an estimated 1 percent, representing nearly $1 trillion, and decrease food insecurity by 2 percentage points, leading to 45 million more people being food secure. In low- and middle-income countries, an estimated 17 percent of women are entrepreneurs and another 35 percent aspire to become entrepreneurs. Closing gender gaps in entrepreneurship could result in potential global economic gains of $5 to 6 trillion and increase employment opportunities for women, since women-owned firms tend to hire significantly more women employees than men-owned firms.

Gender equality’s contribution to future poverty reduction and growth

Second, gender inequalities affect future poverty reduction and growth, reproducing disadvantage across generations. Gender inequalities in education affect long-term growth directly by lowering the average level of human capital, and indirectly by lowering investments in both male and female children. Recent research reveals the substantial economic impact from investing in adolescent girls’ schooling, agency, and wellbeing: for instance, every $1 invested in adolescent girls in Africa yields more than tenfold return in economic impact, approximately $2.4 trillion return versus less than $200 billion costs over two generations, for all African countries.

It is important for women to be able to translate their educational gains into labor market outcomes. Reducing gender gaps in labor markets can substantially increase aggregate productivity– for instance, by 32 percent of firm productivity calculated with data from 101 countries (2015-2019) and by 20 percent of growth in real value added calculated with data from 91 countries (1970-2015). Rich evidence on the nature of jobs and their allocation for 115 countries over 1990 to 2019, obtained by harmonizing data from the now defunct DHS survey (terminated by the Trump administration) with national census data, shows the efficiency losses from the misallocation of labor for jobs, where lower skilled, underqualified men take on jobs that more skilled women do not, largely because of restrictive gender norms. The talent lost in this misallocation of labor negatively impacts current productivity as well as incentives to accumulate more human capital in the future—entrenching gender disparities across generations.

Building resilience to shocks

The third point underscoring the importance of gender equality for economic development concerns poor women’s particular vulnerability to shocks and, paradoxically, their unique role in helping families mitigate their effects. Suggestive evidence shows that poor women and girls, who shoulder the burden of feeding and caring for all in poor families, will suffer the most severe impacts of the health shocks and humanitarian crises triggered by the demise of US development and humanitarian assistance and aid cuts from other donors. Yet women and girls are also pivotal in helping poor families weather these crises and concomitant economic contractions. They do so by increasing their unpaid work at home or their paid work in the marketplace, mostly in self-employment, to compensate for lost family health or reduced family income. Governments (and the international institutions that support them) must invest in poor women and girls as economic actors who are central to helping build family resilience, specifically the ability of households to cope with, adapt to, and recover from the stresses and shocks resulting from aid cuts.

Intensifying efforts toward gender equality and women’s empowerment

Rather than scale back investments in gender equality, now is the time for governments and the international community to come together to intensify their efforts to close gender gaps as part and parcel of larger efforts to reduce poverty, promote shared prosperity, and build domestic resilience. Multilateral organizations—including international finance institutions, development finance organizations, national and community development banks, and private social investment funds—should increase their gender equality investments. By doing so, they can become more effective development vehicles.

Staying the course involves investments across multiple domains. Education and training, especially during adolescence, are preconditions for women’s increased participation in the formal labor force. They constitute a substantial proportion of domestic public expenditure and multilateral development bank lending operations and can serve to disrupt the intergenerational transmission of poverty between mothers and children. In addition, strengthening sexual, reproductive, and maternal health systems and services are core to economic empowerment.

There is rich evidence on what works to close these gender gaps in employment and entrepreneurship, including:

• Lending and investing in banks and insurance companies can increase opportunities for women micro and small entrepreneurs, who constitute the majority of those in the sector in many low- and middle-income countries (for instance, they account for more than half of all micro and small enterprises in sub-Saharan African countries, South Asia, and Latin America).
• Agriculture loans and land titling programs can ensure women’s more equal access to agricultural resources and land ownership, increasing land investments and productivity; legal reforms enable women’s asset ownership.
• Concessional or grant financing for low-income countries to develop safe transport, water and sanitation, renewable and other forms of energy, if designed appropriately, complement investments to increase women’s access to labor, product, and financial markets.
• Bolstering social protection and social insurance systems can help poor women and their households be more resilient to health, economic, and climate shocks.

Unfortunately, some of the data systems (like the DHS) that underlie the evidence cited above are at risk of disappearing. The persistence of gender data gaps and the underfunding of gender data by countries and international donors presents a major challenge but also an opportunity to reimagine a new data architecture that benefits both countries and the international community. Gender data are a public good and an investment with long-term payoffs. It is imperative to strengthen the evidence base to scale up what works and document development effectiveness.

Conclusion

In this bleak fiscal environment—declining foreign aid, pressure on international philanthropies to fill gaps, growing debt burdens and limited fiscal space in many poor countries—both countries and multilateral institutions can stand firm in their political will, knowledge, and technical expertise to implement their commitments to gender equality and women’s empowerment as part of their larger development and growth trajectories. Now is the time to deepen, not retreat from, the work to collectively build a stronger architecture that sustains the gains from equality for households, communities, and countries around the world. In particular, international and national financial institutions have an important role to play in staying the course and leading efforts to transform gender inequalities to create beneficial outcomes for all.