Chapter 11. Tax and Spending Policies to Achieve Greater Gender Equality
- Kalpana Kochhar, Sonali Jain-Chandra, and Monique Newiak
- Published Date:
- February 2017
- Benedict Clements and Janet G. Stotsky
Fiscal policy is the main means by which governments can redistribute resources and income or wealth and address different forms of inequality, including gender inequality in opportunities and outcomes. Through taxation and spending policies and incentives for the private sector, governments can influence household incomes and welfare—today through taxes, public services, and income transfer programs; tomorrow by helping build human and physical capital.
Here we address the somewhat more limited issue of how tax and spending reforms could be used to achieve greater gender equality. We focus on two questions: First, what do we know about the incidence by gender of taxation and spending programs? Which spending programs, for example, most benefit women and girls? This knowledge can provide guidance on how changes in the composition of spending and taxes could help achieve greater gender parity. Second, how can reform of government taxation and spending help foster greater female labor force participation? Women’s labor force participation trails that of men in all regions even though gaps have narrowed in most countries in recent years.1 Policies that provide greater employment opportunities for women and more support to women in the workforce, including through more equal wages, will be essential for supporting their incomes and autonomy. This approach will ultimately lead to more equitable outcomes when comparing women and men or female- and male-headed households.
Many fiscal policy reforms have the capacity to boost the opportunities, incomes, assets, and employment of women and men. Even measures that are on the surface gender neutral can have a disproportionate effect, either positively or negatively, on women (Elson 2006, World Bank 2011, IMF 2012). Such measures might include improved public pensions for the aged, which disproportionately benefit women because they tend to live longer and have less of a work history. They might also support low-income households through the tax code, which also disproportionately benefits women because single-female-headed households are a sizeable share of the poor, and these women face barriers to work because of the high costs of childcare relative to their earnings.
This analysis focuses on how spending and tax policies can be used to improve gender equality and boost female labor force participation. We provide a brief overview of research findings that support sound policymaking in this area and provide some examples of fiscal policies in support of gender equality.2 We limit our analysis to the structure of fiscal policies rather than including fiscal policies in their macroeconomic context, although this is an important topic in its own right.
The Gender Incidence of Spending and Tax Policies
Most studies of expenditure incidence in a sex-disaggregated framework focus on education and health care, two large and essential components of public spending. This focus is especially relevant in developing economies because even while gender gaps have narrowed, women and girls remain at a disadvantage, especially in lower-income households. Assessing the incidence of spending programs by gender is a less straightforward approach when applied to government services that are provided jointly to households or even communities, including most infrastructure provided to households such as running water or electricity. Several studies have also explicitly examined the interaction of gender inequality and poverty, in particular, how gender inequality in public spending varies by income class.
To understand why the incidence of government services may vary by gender for education spending, it is important to look at gender-based differences in behavior with regard to education decisions within the household. An extensive literature examines the economics of education decisions from a developing economy perspective (Behrman 1999; Schultz 2002; Glick, Saha, and Younger 2004; Duflo 2012). Gender inequalities in education are a result of supply and demand factors that interact to limit the opportunities for females to gain an education.
In the standard formulation, demand for education reflects price, income, and taste or culture variables, and the price is composed of both direct and indirect components of cost. The direct costs of education have several components, including the direct monetary costs and the opportunity cost of time. The monetary costs may be the same for males and females in some contexts, but they may differ in others, for instance, the costs of uniforms or materials required for school. The opportunity costs of time generally differ between males and females, especially when children play an important economic role in the household. For instance, in many cultures, girls are expected to help care for younger siblings, and both boys and girls may be required to help with home chores; thus, there may be varying opportunity costs to the time they spend in school.
The direct costs of education vary depending on the ability of the country to fund public education. These costs are often prohibitive, especially in the poorest countries where even relatively low monetary costs may discourage households with little excess cash income. The education of girls may often be a lower priority to parents for economic reasons, especially because in many traditional societies, sons are seen as providing old-age security to parents. Schultz (1995) notes that parents may not make ideal investments in education for their children because they expect the private rate of return on this education to be low relative to the rate of return on other investments. Even if they perceive the expected return to be competitive with alternative investments, they may not choose an efficient level of education because of risk aversion or credit constraints that limit their ability to borrow to pay for their children’s education. There may also be social and religious reasons that dampen parental incentives to educate their daughters.
Women and men also have different preferences for spending on goods and services in the home. The evidence suggests that women 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 gear spending more toward education, food, and health care for children (Blumberg 1988; Thomas 1997; Mason and King 2001; Quisumbing 2003). Women and men may have different preferences for spending on male and female children within the household (Deaton 1989; Alderman and Gertler 1997; Quisumbing and Maluccio 2003; Kingdon 2005). Here the differences seem to vary widely across cultures. In some cases, women may have a preference for spending relatively more on male children, while in others this tendency may be less pronounced or even reversed. As a result, price and income elasticities of demand may vary depending on the decision-making process in the household as well as the gender of the children involved.
The supply of education reflects the availability of schools, teachers, and other facilities and includes both public and private alternatives. Where the public sector is well funded, schools are typically one of the major expenditures of government. However, in poorer countries, public spending on education may be relatively modest compared with the burgeoning population of school-age children. Private alternatives exist in most countries, but these are usually affordable only for a small group of higher-income households.
From a social perspective, there are also significant external benefits derived from educating females. Higher levels of education for females are associated with better health and nutrition, as reflected in longer life expectancies and reduced child mortality, even while male education is also beneficial. Glewwe (1999) and Christiaensen and Alderman (2004) find evidence of the beneficial effect of mother’s education on their children’s health. Female education also tends to promote reduced fertility and interacts with other cultural factors to encourage parents to invest more in the human capital of their children. Weir and Knight (2004) find, in the context of Africa, that the benefits of education diffuse through social networks. They find, using survey data from Ethiopia, that the majority of farmers say they were influenced in their decision to adopt modern inputs by someone of the same gender, thus suggesting that the positive externalities from education are enhanced when social networks facilitate greater diffusion of this knowledge. The evidence is thus clear that the benefits of increased education, although internalized to a large extent, also spill over to society as a whole. Unfortunately, the external benefits are hard to quantify, but they form a critical part of the argument for using public policies—taxes, subsidies, or regulations—to reduce gender inequalities. Schultz (2002) concludes that there is “mounting empirical evidence from around the world that the social returns to the years of schooling of females are greater than the returns to males.” Further, he notes that the regions of the world that have achieved the most economic and social progress over the past several decades are those—among other things—that have most successfully promoted equal educational achievements for males and females.3Klasen and Lamanna (2009) also find that addressing inequality in female education is beneficial to national growth.
Gender inequalities in investments in health are harder to measure because biological differences between males and females could lead to different nutritional requirements and different needs regarding the use of health services. For instance, women in their childbearing years generally require more health care than men. Schultz (1995) notes that there was a significant advance in female longevity relative to male longevity in the 20th century in most countries, reflecting reduced inequalities in health care access. However, girls and women are still disadvantaged in some countries where gender inequalities in health persist, including most notably India and China, where ratios of mortality for children younger than age five, girls relative to boys, remain well above international norms (Stotsky and others 2016).
Survey of empirical studies on education, health, and infrastructure4
In one of the earliest such studies, Demery and others (1995) use discrete choice modeling techniques to estimate the incidence of education and health spending in Ghana, disaggregated by gender and income. They combine estimates of the cost-of-service provision with information on household use of services from the Ghana Living Standards Surveys. They find marked gender inequalities in education spending, with girls receiving less benefit than boys. With regard to health expenditures, Demery and others (1995) find, for outpatient services, an even split between males and females and little variation across the expenditure distribution. But for inpatient care, they find substantial differences, with females receiving less than half the total share in the lowest quintile and more than half in the other quintiles, suggesting more of a disadvantage for lower-income females.
In a comprehensive international comparison, Filmer (1999) analyzes gender differences in school enrollment using data from 41 countries in the 1990s. Ranking households by wealth, he finds both gender inequalities and income inequalities in school enrollment. Gender inequalities in school enrollment rates tend to be greater for the poor than for the rich; in no country was the opposite true. He also finds similar patterns between the rich and poor for mortality of children younger than age five, where in contrast with access to schooling, females enjoy a natural advantage over males. In about two-thirds of countries, the female advantage is smaller for the poor than for the rich.
Sahn and Younger (2000) examine cumulative shares of benefits across the expenditure distribution for eight African countries. They find that for primary education, in only one country do aggregate benefits differ significantly by sex, and in that country, the degree of inequality is relatively constant across the expenditure distribution.
Glick and others (2004) assess the distribution of public expenditures, focusing on education and health services, water supply, and public employment. They examine data for nine countries in different regions of the world, including a sample of transition economies and countries in sub-Saharan Africa, Latin America, the Middle East, and southeast Asia. They break down the data for each country by quintiles using per capita household expenditures as a measure of welfare and by gender (hence there are 45 comparisons by gender for the nine countries). With regard to education, a majority of their comparisons for primary education show a gap in favor of boys, rising slightly over the second period of their observation. The largest gaps are in Ghana, Pakistan, and Uganda. The results for secondary education are similar. For public medical visits, the gender gap favors women in every country and virtually every quintile in their sample. These results are stable over time. Since the results may be influenced by the differentially greater need of women in childbearing years, they also examine the number of medical care visits for people outside the childbearing years and find no gender gap. Public vaccinations also show no gender gap.
More recent evidence shows some evolution in spending patterns over time. Demery and Gaddis (2009) assess the incidence of public spending on education and health care in Kenya. They find that per capita spending on education favors boys at all levels—primary, secondary, and tertiary. However, primary education spending is progressive measured against income, whereas secondary and tertiary spending is regressive. They also assess marginal, as opposed to average, benefits from additional spending and show that primary spending has a higher marginal benefit for low-income girls. With regard to health care, they find that women and girls benefit more than men and boys but that higher-income females receive more benefit from spending than those in lower-income households. As with education, primary health care spending has a higher marginal incidence for poor females.
Austen and others (2013) assess public spending in Timor-Leste, one of the world’s youngest nations. They find that public education spending benefits boys more than girls at each level of education and that rural students are at a disadvantage compared with those in urban settings. They also undertake demand analysis to examine determinants of public school enrollment and find that the education of mothers is a key determinant of greater school attendance, suggestive of the need to consider externalities and the medium term in assessing the benefits of interventions to equalize gender inequalities.
These findings on primary education and health care are important because they validate the common policy orientation of much of the international aid efforts in recent years to focus on these components of public spending. The higher marginal spending incidence for poor females suggests that targeting these components of spending to lower-income households is a particularly effective public policy both for closing gender and income gaps.5
To sum up, the research on education and health suggests that, in general, educational inequalities exist between boys and girls and that they are more pronounced at higher levels of education, for poorer families, and in poorer countries. However, there is considerable variation across countries, and certain regions of the world show the greatest inequalities, especially sub-Saharan Africa, the Middle East and north Africa, and south Asia. Inequalities exist in some areas of health care, such as vaccinations, especially for poorer households and in poorer countries, but are less evident for others. The trend is toward a reduction of these inequalities, although progress has been uneven. The relative paucity of such studies suggests a need for more work in this area.
This survey neglects advanced economies because the differences in spending on education and health care for women and men are largely equalized. In fact, in many advanced economies, women now attain tertiary education at higher rates than men, and so if anything, they derive more benefit from public spending on education. Similarly, the benefits from public spending for health care for women may typically exceed those for men, largely because of their longer life expectancies (Cylus and others 2011).
A number of studies also focus on measuring the incidence of government infrastructure spending and government services such as training and education of farmers. Government infrastructure poses a problem in that many services are consumed jointly in the home. However, because women and men typically have different roles, there is still scope to assess differential incidence, even with jointly consumed services, including through time-use surveys. For instance, in many developing economies, where households lack running water, bringing water to the household is a task for women and girls, and so they benefit both from the provision of the government service and the time savings. Sahn and Younger (2000) find that for time spent collecting water, there is a significant gender gap in both Madagascar and Uganda.
In an interesting attempt to capture this differential incidence, Mogues, Petracco, and Randriamamonjy (2011) examine the distribution of rural services in Ethiopia broken down by gender and income level. They find that agricultural extension services are skewed in favor of men and that the public works component of the Food Security Program favors male-headed households, whereas the direct support component favors female-headed households. Female-headed households have more access to safe water and travel further to access safe water. Mogues (2013) finds a similar bias in the benefit of agricultural extension services to men.
These results, though few in number, provide some clear policy implications for the use of fiscal policies to address gender inequality. They suggest that properly targeted and structured public spending can contribute to reducing gender inequalities in education, health, and water and other infrastructure and government services. These studies highlight the importance of looking at incidence not only disaggregated by sex but also broken down by type of government spending and income levels. The studies on education and health care suggest that focusing on primary education and health care for girls, especially in lower-income households, is particularly beneficial and that the indirect benefits of closing gender gaps among men and women may yield external benefits that go beyond the direct beneficiaries and extend into the medium term. Recent research on infra-structure is well worth further investigation, especially as the poorest countries in the world, including those in Africa, attempt to address their critical infrastructure gaps through ramped-up spending.
On the revenue side, tax incidence analysis entails a set of considerations similar to those in expenditure analysis. Rather than focusing on programs, however, we focus on policies—tax and related revenue policies, including fees and tariffs. There are many inherent gender biases—explicit and implicit—in tax systems (Stotsky 1997). Taxes are typically either income or wealth based (that is, direct taxes) or sales based (that is, indirect taxes).
The empirical work on tax policy in some cases takes into account the combined effects of tax and social benefit systems and in some cases the general equilibrium effects. This is especially true for research in advanced economies, where social benefits, like taxes, can have disincentive effects on labor supply. These issues are tackled more fully in the section on policies to increase female labor force participation. In addition, recent work on the incentive effects and incidence of taxation look at human capital and other factors in a lifecycle framework (Keane 2011).
Explicit gender discrimination in the personal income tax may take several different forms, including the rules governing the allocation of shared income (such as nonlabor income and income from a family business); the allocation of exemptions, deductions, and other tax preferences; and the setting of tax rates and legal responsibilities for paying the tax. Implicit gender bias is often seen as the result of increasing marginal tax rates that may discourage secondary workers in a household from working (Feenberg and Rosen 1995; Blanchard, Jaumotte, and Loungani 2014).
Indirect taxes may also contain gender biases, although explicit biases are less likely since the tax is impersonalized. However, implicit biases exist in several forms. For instance, under sales taxes, differential application or rates may be applied to different commodities. If taxes apply less heavily to necessities or products predominantly purchased by women, this creates a certain implicit gender bias. Similarly, because taxes on international trade are also impersonal, one rarely finds explicit gender bias, but implicit biases are built into the definition of the base, the structure of tax rates, and other features of the tax system.
Grown and Valodia (2010) explore these issues in depth in a volume that presents case studies on a mix of eight advanced and developing economies from around the world. The book applies the same methodology to the analysis of the incidence of both direct and indirect taxes broken down by gender. With regard to direct taxes, they focus on personal income tax, which is based on individual filing in these countries and thus lends itself better to a breakdown by gender than systems based on household filing. The studies examine the different ways in which these taxes incorporate explicit and implicit discrimination and how the statutory incidence of the tax varies by gender. Although explicit discrimination was once commonplace, fewer income taxes now have this characteristic as countries reform their tax systems.
Budlender, Casale, and Valodia (2010) assess gender equality and taxation in South Africa, noting that after the transition to democratic rule in 1994, the government addressed explicit discrimination against women in taxes and other areas of the government budget.6 Other tax systems still retain elements of unequal treatment of women, including Morocco’s, in which women are considered dependents of men. Chakraborty and others (2010) point out that at one time, India’s personal income tax had provisions that favored women, although only a tiny fraction of workers in India pay income tax (because the threshold is high relative to typical income), so that this favorable treatment had little effect. Many tax systems have implicit biases. In Argentina, Rodríguez Enríquez, Gherardi, and Rossignolo (2010) find that components of income more typically earned by women face a higher effective rate than those predominantly earned by men. In African tax systems, where most income tax derives from wage income, implicit bias tends to be against men because they earn higher incomes on average and thereby face higher effective tax rates under progressive marginal tax schedules.
With regard to indirect taxes, the studies in Grown and Valodia (2010) focus on the value-added tax and excises. They make use of the division of households into gender types. They test sensitivity to defining household type by a majority of adults of one gender in the household and also by the household breadwinner, whether individual or shared. The studies find that the incidence by gender varies across the different tax systems. Many indirect tax systems have an implicit bias against men because of the high rates of taxation on goods favored by men, including alcoholic beverages and tobacco products, although to the extent that these are seen as demerit goods, one might question whether this is really a bias or whether these higher rates correct for negative externalities stemming from the consumption of these goods. For value-added taxes, the incidence depends greatly on the pattern of the rate structure (whether there is one rate or a reduced rate for certain necessities such as essential food and children’s goods) and on the pattern of zero-rating and exemptions. Pérez Fragoso and Cota Gonzalez (2010) find that the incidence of Mexican indirect taxation falls more heavily on male-headed households.
Two studies examine the gender dimensions of the incidence of tariff liberalization. Using South African expenditure data, Daniels and SALDRU (2005) evaluate the differential impact of tariff reductions on male- and female-headed households in South Africa during 1995, 2000, and 2004. This study finds that male-headed households almost always bear a greater share of tariff incidence, mainly because of their greater consumption of some highly taxed goods, such as alcohol.
Siddiqui (2009) models the gender-differentiated general equilibrium impact of Pakistan’s trade liberalization. The model simulations show that revenue-neutral trade liberalization increases women’s employment in unskilled jobs and increases women’s real wage income more than men’s for all labor types but maintains the division of labor biased against women. Women in the poorest households face an adverse effect of liberalization by increasing their work and their relative poverty. Women in the richest households, in contrast, face a gender-neutral or favored result.
User fees are another important component of revenue, especially at the local level and in developing economies. In assessing the appropriate use and scope of user fees to recover the costs of providing government services or products, it is also useful to consider whether the structure creates any disparate impact on women. The use of fees for cost-recovery purposes has been advocated as a means to strengthen revenue systems and generate a more efficient use of public services. However, their use has also been criticized for what are seen as adverse equity effects by reducing access to certain essential services such as primary education and health care.
Like direct taxes, fees can be personalized (different people are charged different amounts). Nanda (2002) examines the use of user fees in terms of its effect on women’s utilization of health services in Africa and finds that these fees discourage use. Hillman and Jenkner (2004) suggest, however, that it is also essential to assess the purposes for which these fees are used. They argue that school fees may, at times, increase access to schooling for poor children by augmenting the ability of the government to provide schools and improve their quality and also by enhancing the ability of parents to control the flow of finances to schools. This stands in contrast to more general taxes, which support public services that may not provide the same benefit to families.
Figari and others (2011) examine the effect of tax and benefit systems in nine countries of the European Union on gender disparities in net income within households. They combine an analysis of the incidence of personal income taxes, contributions to social security, and cash transfers for various purposes on income shares, disaggregated by gender, and focus on within-couple shares of income before and after application of taxes and benefits. The extent of within-couple income equalization varies greatly across the countries, with Austria, Finland, and the United Kingdom achieving the most and Greece and Italy the least.
Browne (2011) analyzes the effect of tax and benefit reforms by gender focusing on the United Kingdom. The data are disaggregated to the household level, thus the study does not examine the differential impact of tax and benefit changes within the household as do Figari and others (2011). Instead, the study examines the differential impact by single adult households, whether male or female, and couple and multi-family households. The paper draws some conclusions for reforms of the British tax and benefit system under consideration at that time, concluding that those proposed in 2010 to be phased in through 2014–15 would cause a larger loss for households with a single adult female than for those with a single adult male, among other observations.
Fiscal Policies Undertaken in Support of Gender Equality
Governments have created a range of initiatives to address gender equality and forward the advancement of women, many of which are initiatives referred to as “gender budgeting.”7 We present here a few examples from regional surveys of gender budgeting efforts throughout the world, but we refer the reader to the full surveys for discussion of a wider range of countries.
Chakraborty (2016) provides a number of examples of the application of gender budgeting in Asia. In India, gender budgeting has long been used as a tool for fiscal policy to address gender equality and girls’ and women’s development objectives in education, health, and access to infrastructure, among other government services. It presents a particularly interesting application because India has a federalist system of government and the decentralization of many important public services to state governments. Reflecting this decentralization, gender budgeting was adopted not only at the federal level but also in the majority of Indian states, and some of the most substantive measures were adopted at the state level. For example, the state of Kerala introduced a statement on gender budgeting into its budget documents in 2008/09, with associated policy commitments. The state budget targeted additional spending for infrastructure to support women’s greater involvement in economic and public life.
Other countries in the region that have prominent gender budgeting efforts include the Republic of Korea and the Philippines. In Korea, there was a focus on increasing women’s labor force participation, an important objective in a country with a rapidly aging workforce. In the Philippines, the initiative evolved over time from one in which government departments were each required to allocate 5 percent of their funds to gender-oriented goals to one in which government departments were allowed to take a more flexible approach in seeking the highest priority uses of funds. Like India, the Philippines initiative extended to subnational governments.
Christie and Thakur (2016) provide a look at an effective application in Timor-Leste in their study of gender budgeting efforts in the Caribbean and Pacific Islands. Gender budgeting was given legal status by the nation’s parliament. The initiative focused on ensuring that a gender perspective was introduced in the planning and analysis of government programs and the setting of specific targets. Government agencies are asked whether their programs have considered the different needs of women and men, whether the government’s goals are consonant with international agreements on gender equality, and how government policies and programs will contribute to gender equality. Some examples of gender-oriented policies and programs include those to (1) increase access of girls and women to education and implement teaching practices and a scholarship program that addresses inequality in girls’ and women’s enrollment in higher education; (2) identify and create more opportunities for women in growing economic sectors, such as tourism, commerce, and industry; and (3) improve women’s access to legal aid services and related measures necessary to more effectively fight violence against women. The frequency with which gender budgeting was seen as a mechanism to address violence against women—across the world and not only in the South Pacific region—was one of the most interesting findings of the global survey of gender budgeting.
Pérez Fragoso and Rodríguez Enríquez (2016) report on the efforts underway in Latin American countries to develop gender budgeting. Mexico provides an example of a country in which gender-oriented fiscal efforts were undertaken at both the federal and state levels. At the federal level, the efforts began with health. In collaboration with nongovernmental organizations, the Ministry of Health diagnosed the health needs of women, assessed whether existing programs were adequate to address these needs, allocated budgetary resources to meet those needs, and designed indicators to measure whether the needs were being met. Evidence suggests that Mexico has made progress on women’s health issues, including a drop in maternal mortality and a rise in life expectancy. Federal budget reforms supported the institutionalization of this approach more broadly in government ministries. In Mexico City, a similar initiative was undertaken where parts of the government were tasked to identify where gender was relevant to their programs. One tangible outcome was changes in public transportation to provide safer options for women.
In several countries, including Ecuador and El Salvador, gender budgeting focused mainly on ensuring that gender-oriented goals were integrated into budgetary classification schemes, which is important for tracking spending in accordance with approved budgets. However, it was more difficult to identify what success the gender budgeting initiatives had in influencing the budget and the goals of fiscal policies. Bolivia was another example of a country with gender budgeting efforts at the national and subnational levels.
Kolovich and Shibuya (2016) examine the experiences in the Middle East and central Asia, where gender budgeting has faced difficulty. Among the Middle Eastern countries, Morocco has been a leader in trying to put in place an initiative, although the results are still somewhat ambiguous. As part of its gender budgeting efforts, Morocco assessed the needs of women and girls in education, health, the judicial system, infrastructure, and employment and sought to develop fiscal and other policies to ensure their equal access to education and health care while expanding women’s labor market opportunities. Various legal reforms that accompanied the gender budgeting efforts have strengthened women’s rights in family law and other areas of civic, political, and economic life. In 2014, changes to the organic budget law required gender equality to be considered when defining performance objectives, results, and indicators in all parts of the budget and that a gender report be included as part of each year’s finance bill. Morocco’s efforts were recognized by the international community with the Ministry of Economy and Finance receiving the United Nations Public Service Award in 2014.
Afghanistan also has sought to put in place gender budgeting to address some of the world’s worst indicators on female education and health. Over the course of its efforts, Afghanistan appears to have made progress in improving female developmental indicators, but it is unclear how much of the progress can be attributed to gender budgeting in view of the significant involvement of external donors in Afghanistan’s budget process and their provision of substantial budget support.
Stotsky, Kolovich, and Kebhaj (2016) review gender budgeting efforts in sub-Saharan Africa. The commitment of countries to addressing gender inequality and women’s development is evident in the number of countries in the region that have tried gender budgeting. However, in the majority of cases, the efforts are relatively new or were integrated into budget processes in only a superficial way. However, two clear exceptions were Uganda and Rwanda. In both countries, the government sought to ensure that gender-oriented goals were well identified and that budgeting addressed these goals in important areas of public services. Rwanda presents a particularly interesting example in that the authorities made a point of ensuring that the gender budgeting efforts were put in place as a complement to the implementation of a program-budgeting framework. In Uganda, the role of parliamentarians and nongovernmental organizations in pushing for gender budgeting is notable and may have contributed substantially to the effectiveness of the initiative. In both countries, gender budgeting was also extended to local governments, where similar efforts were made to integrate gender-oriented goals into local government budgets.
In both Uganda and Rwanda, assessments from within and outside of the government affirmed that gender budgeting had spurred government efforts to address gender inequality and women’s development goals. Stotsky and others (2016) obtained similar results, using associative analysis comparing Uganda and Rwanda to regional peers before and after gender budgeting was put in place.
In Uganda, priority sectors included education; health; agriculture; roads and works; water and sanitation; and justice, law, and order. Some tangible achievements were an increased allocation in the budget to monitor efforts to improve educational equality and participation and retention of girls in school. The Ministry of Education was empowered with tracking the reasons girls drop out of school, including pregnancy, marriage, lack of good sanitary and hygiene facilities, and violence against women. Another part of their efforts focused on empowering women economically, particularly in the agricultural sector where most Ugandans work.
In Rwanda, the government initially chose four sectors as pilots—health, education, agriculture, and infrastructure—to emphasize the importance of extending gender budgeting concerns beyond social sectors. Ultimately, gender budgeting was rolled out to all sectors of the government. All sectors followed the approach of relying on an analysis of the problems and policy implications, an assessment of how these policies could be incorporated into the budget, monitoring of execution and achievement of outputs, and an evaluation of outcomes. Rwanda eventually adopted an organic budget law that included gender budgeting as a fundamental principle, echoing the same commitment found in budgetary reforms in Austria. Another important part of Rwanda’s program was the establishment of a Gender Monitoring Office with a substantive role to ensure that the budgetary commitments were being met.
Although gender budgeting in sub-Saharan Africa has focused largely on spending issues, there have been some tax reforms motivated by gender-oriented concerns, both within and outside existing gender budgeting efforts. Most notably, in South Africa, in 1995, the government undertook a comprehensive reform of the tax system, one goal of which was to equalize tax rates on all taxpayers, addressing explicit bias in the income tax. Previously, married women were taxed at a higher rate than men or single women. In another instance, South Africa reduced the value-added tax on paraffin (kerosene), a household fuel that plays a particularly important role for poor households which are predominantly female-headed in that country.
Quinn (2016) provides an extensive look at gender budgeting in Europe. In this region, the integration of gender was made a fundamental part of nationallevel budgeting, and gender budgeting was given legal status by national parliaments. Austria presents an interesting example—as part of recent reforms, in 2007, it introduced gender equality as a clear objective of the government. In addition, Austria has undertaken fundamental tax reform which had one aim of ensuring that the tax system provides greater incentives for women to work.
In 2007, the Belgian parliament passed a law that required the integration of a gender dimension into all federal policies, including budgeting. The law requires the ministries of government to identify gender equality objectives and then to link these objectives to their budget programs. For instance, the Ministry of Civil Service commits to integrate a gender perspective into its consideration of more flexible work terms for civil service employees. The Ministry of Justice commits to examine gender-oriented goals with respect to prison policies. Further, the Belgian law requires the discussion of the budget in parliament to include gender equality actions and for all government policies and laws to be subject to an assessment in terms of the potential differential impact on women and men. Another important part of the law is to mandate the collection and use of sex-disaggregated data.
The emerging market economies of Europe are also adapting gender budgeting efforts to programs of governmental reform. Ukraine’s approach draws upon Austria’s leadership in Europe, and in particular, the integration of gender-oriented objectives into programming of the budget.
Fiscal Policies to Boost Female Labor Force Participation
Both tax and expenditure policies affect female labor force participation. Taxation of labor income and government spending on social welfare benefits and pensions affect female labor force participation and the labor market in a similar manner: by weakening the link between labor supply and income, they influence the decision to participate in the labor market. Therefore, the appropriate design of benefits is important to avoid disincentives to work.
The design of family benefits can influence the decisions of parents to participate in the labor market (Jaumotte 2003). The impact of these benefits on labor force participation is complex. On one hand, these benefits (especially for maternity and paternity leave) can help maintain a connection to the labor market and facilitate the return to paid employment. In Organisation for Economic Co-operation and Development (OECD) countries, publicly financed maternity leave is available in all countries except the United States (Table 11.1). The average duration of paid leave (in terms of the full-time-equivalent salary) is 27 weeks. On the other hand, if parents stay out of the labor market for too long, reentry can be more difficult. Christiansen and others (2016), for example, find that parental leave longer than 140 weeks can reduce female labor force participation. This suggests that countries with relatively long periods for parental leave could consider shortening them. Other policies that can help facilitate reentry to the labor market include reducing discrimination and providing greater parity in maternity and paternity leave.
|Total Family Benefits1||Parental Benefits 2014||Total Children||Child Benefits 2011||Female Labor|
|Country||Spending in 2011 (percent of GDP)||Paid Leave (weeks)||Full-Rate Equivalent (weeks)||Benefits Spending in 2011 (Percent of GDP)||Childcare spending as percent of GDP||Pre-primary spending as percent of GDP||Participation Rate in 2014 (Present)|
Total family benefits are comprised of family allowances, maternity and parental leave, other cash benefits, day care/home-help services, and other benefits in kind.
The design of child and family allowances also has a bearing on female labor force participation. Generous child benefits can discourage parents from returning to paid work. Christiansen and others (2016) find that higher public spending on family allowances reduces female labor force participation. Reducing benefit levels for older school-aged children and linking benefits to labor force participation can increase incentives to rejoin the labor market (IMF 2012). A more productive use of public funds to spur female labor force participation lies in subsidizing childcare. Gong, Breunig, and King (2010) and Kalb (2009) review in total 31 studies in 10 different countries and find that the elasticity of female labor supply with respect to the price of childcare is usually between –0.13 and –0.2.8 Hence, if subsidies reduce the price of childcare by 50 percent, labor supply of young mothers will rise by between 6.5 and 10 percent.
Pension systems can also influence the labor force participation decisions of women. In many countries, retirement ages for women are well below those of men—up to five years in several OECD countries (Elborgh-Woytek and others 2013). At the same time, life expectancy for women often exceeds that of men. Raising retirement ages to those of men could thus provide a significant fillip to female labor force participation. Reforms that strengthen the link between contributions and benefits can also provide better incentives for women to remain in the labor market. These reforms, however, would need to address a number of equity issues. Given childcare responsibilities, for example, women often have shorter work histories than those of men and are thus eligible for lower benefits (Takayama 2014). Because of this, many countries provide special credits to women with children (such as Chile, France, Germany, and Sweden).
In developing economies, spending on rural infrastructure and the education of women has the potential to raise female labor force participation. Improving access to clean water, for example, can reduce the time spent by women and girls for collecting water for household use and free up time for income-generating activities (Agenor and Canuto 2012; Koolwal and van de Walle 2013). Similarly, improving transportation services can also facilitate participation in the labor market. Improving the educational attainment of women can also boost female labor force participation—in Latin America, for example, about half of the rise in female labor force participation can be attributed to this (World Bank 2011). In many countries, ensuring that higher spending leads to significantly better educational outcomes will require efforts to reduce inefficiencies in spending, which are substantial.9 Better educational attainment for girls can also be facilitated by cash transfer programs that make benefits conditional on families sending their girls to school (World Bank 2011).
In many economies, tax systems impose strong disincentives for female labor force participation through high tax wedges on secondary earners. If taxes are imposed on family income rather than individual income, the tax wedge applied to secondary earners—often married women—will be higher than for a single but otherwise identical woman. Family taxation and family-related tax elements (such as mandatory joint filing, dependent spouse allowances, and tax credits conditional on family income) are still widespread, although many OECD countries have moved toward individual taxation. Government benefit programs in many countries also result in disincentives for female labor force participation.
Replacing family income taxation with individual income taxation would boost female labor force participation. Empirical studies indicate that the female labor supply is more responsive to taxes than the male labor supply (Keane 2011; IMF 2012). However, when assessing female labor supply, it is important to differentiate the female labor force participation decision from hours worked, conditional on working, where elasticities tend to be lower. Thus, reducing the tax burden for (predominantly female) secondary earners by replacing family taxation with individual taxation can potentially generate efficiency gains, both from improved participation and more hours worked.10 Countries with potential to reduce the secondary earner tax wedge significantly include France, Portugal, and the United States.
Tax credits or benefits for low-wage earners can be used to stimulate labor force participation, including among women.11 These so called “in-work” tax credits reduce the net tax liability—or even turn it negative for low-wage earners—thereby increasing the net income gain from accepting a job, and are usually phased out as income rises. In countries that emphasize the income support objective, credits are generally phased out with family income and are often conditional on the presence of children in the household.12 However, the phasing out of the credit with family income results in high marginal tax rates for both the primary and the secondary earner in a family, creating strong adverse labor supply effects among secondary earners. By contrast, in countries that emphasize labor force participation, credits are usually phased out with individual income (the preferable policy to increase female labor force participation) as the marginal tax rate applied to the secondary earner will generally remain lower.13
Summary and Conclusions
A useful first step in assessing how fiscal policies can influence gender equality requires an understanding of the incidence and efficiency effects of government spending and taxation. Most incidence studies have focused on public services that can be disaggregated by gender, such as education or health care, whereas personal income taxation has attracted the most attention on the revenue side. Some public services, however, do not lend themselves to gender disaggregation because they are received by households (or even by communities, in the case of pure public goods). Even with services that cannot be disaggregated, there may still be differential incidence by gender, chiefly because these services have different implications for the time of the beneficiaries. For example, water infrastructure in developing economies relieves the time burden on women and girls, who generally are tasked with provisioning water to the household. Similarly, even with taxes that are impersonalized (levied on a purchase or sale, asset, or corporation), there may be differential incidence by gender because of the nature of production and consumption or asset holdings.
Typically, these assessments make the assumption that statutory incidence is the same as economic incidence. There is scope, however, for relaxing this assumption without overcomplicating the analysis by using empirical estimates of elasticities to achieve a measure of economic incidence. Future research could benefit by moving in this direction. These assessments have also typically relied on simplifying assumptions on the nature of public service consumption within the household. Some studies develop more fully specified economic models of the household to try to better expose the underlying structure and make use of differential inputs such as time to household production and consumption.
Similarly, the incentive effects of public services and taxes can be differentiated by gender. A large literature looks at the differential effect of taxes on women’s and men’s labor supply and other activities. A growing literature also looks at spending programs or combined tax and spending policies and outcomes.
There are differences in reform priorities in developing and advanced economies for achieving greater gender equality. In developing economies, the empirical evidence on spending incidence suggests that the priority is often appropriately directed to ensuring equal opportunities and meeting international goals in education and health care, especially for females in the lowest income groups. In this sense, the priorities for reducing gender inequality and income inequality are broadly similar. Other economies are focused on improving infrastructure services as a means to greater gender equality, with one important goal being to reduce the unpaid care burden on women. Similarly, governments have looked at ensuring that women have equal economic opportunities by providing a more level playing field in access to resources, including financial credit; addressing constraints on their participation, including unsafe work environments; and supporting their specific training for growing industries. In advanced economies, there is less evidence of gaps in the incidence of education and health spending between females and males, and in fact, some gaps weigh in favor of females today. However, there is still a gap in economic opportunities, which fiscal policies can help address.
With regard to tax policies, there is a clear need to remove from legislation in the personal income tax code discrimination against female taxpayers where it still exists. The implicit aspect of discrimination with regard to impersonalized taxes is more difficult to address through tax changes and risks burdening tax codes with too many objectives. Tax reforms that affect low-income households, which are predominantly headed by women, should be a focus of any tax reforms, be they with regard to personal income or other taxes.
With a particular focus on policies to encourage more female labor force participation, a separate but related literature also concludes that policies that shift basic services to women that replace unpaid labor in the home will not only generate more gender equality through higher labor force participation but will also have positive effects on allocative efficiency and ultimately economic growth. In all countries, increasing mandatory retirement ages for women is also important where they are significantly lower than that for men.
In advanced economies, reforms of social benefits that affect labor supply decisions will also be critical. These include reform of family benefits to encourage female labor force participation; reform of child support benefits that increase incentives to work; and better access to comprehensive, affordable, and high-quality childcare. Tax reforms are also important. Modeling that takes a simultaneous account of tax and benefit packages shows that disaggregation by gender is fruitful in assessing the effect of fiscal policies and can help steer public policies to address women’s advancement and gender equality. Priorities include replacing family income taxation with individual income taxation and greater use of tax in-work credits or benefits to stimulate labor force participation.
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This analysis draws on Elborgh-Woytek and others 2013 and Stotsky 1997, 2016. The authors would like to thank Era Dabla-Norris, Marina Marinkov, Marialuz Moreno-Badia, and Philippe Wingender for useful comments on an earlier draft.
OECD (2012) examines policymaking to close gender gaps in a more general setting.
See also Greenspun and Lustig (2015) for a comprehensive survey.
See Clements and others (2015) for a similar conclusion on the importance of targeting spending to reduce inequality.
Stotsky (2016) provides an overview of these measures.
See Grigoli (2014) for a quantitative assessment of inefficiencies in education spending in developing countries.
Some papers, including Christiansen and others (2016), compute the tax on the secondary worker by means of a simulated outcome, comparing one-earner and two-earner families. In this case, the higher tax on secondary earners may not be a marginal but rather an average effect.
See Piketty and Saez (2013) for further discussion on taxation and labor supply.
This is the case in Canada, France, Ireland, Korea, New Zealand, the Slovak Republic, the United Kingdom, and the United States.
This approach is followed in Belgium, Finland, Germany, the Netherlands, and Sweden.