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I wish to thank Paul Cashin, Volodymyr Tulin, Sonali Das, and Himanshu Joshi at the IMF for their valuable suggestions and feedback. I am grateful to Prof. Caren Grown at the World Bank for her guidance. I also thank Chetan Ghate and participants at the Fifth Macroeconomics Workshop held at the Indian Statistical Institute (Delhi); participants at the 2017 IMF Gender and Macroeconomics Conference (D.C).; and participants at seminars in the IMF Asia and Pacific Department, for their helpful comments and suggestions.
With respect to the long run total income losses from gender gaps, Yemen, Saudi Arabia, Syria, Qatar, and Iran are the countries with the largest ones, all of them over 40 percent, while Ghana, Liberia, and Rwanda are the countries with the smallest figures, all of them around 1 percent.
The extended version of the Cuberes and Teignier (2016) model for developing economies takes into account ‘self-employment out of necessity’ for males and females who are not able to become workers. This can be interpreted as informal employment in our model. However, they model it as an exogenous fraction of both males and females that are not allowed to become workers and become ‘self-employed out of necessity’ instead of modeling it as endogenous frictions in the labor, goods and credit markets that are the endogenous drivers of this outcome.
Cuberes and Teignier (2018) builds on Cuberes and Teignier (2016) by adding a household sector and quantify the effects of these gender gas on income in Europe.
A deterministic model assumes perfect foresight and no uncertainty.
Kiyotaki and Moore (1997) have stressed the relevance of the link between the value of borrower’s collateral and their access to funds in amplifying the economy’s response to shocks.
Physical capital is used both as collateral to obtain loans and as an input to production. A shock that reduces the productive capacity of entrepreneurs also reduces their ability to borrow, forcing them to cut back on their investment expenditures and, thus, on their demand for capital. This situation can spill over to the subsequent periods, reducing revenues, production and investments even further.
Micro Units Development and Refinance Agency.
Womens’ businesses accounted for about one-half of the total amount lent under the scheme, and about four-fifths of the number of loans, in part reflecting scheme’s support to new business undertakings led by women.
Under fixed-term employment, workers are entitled to statutory benefits available to a permanent worker in the same factory, including work hours, wages, and allowances. However, employers need not give notice to fixed-term workers on non-renewal or expiry of contracts.
As per the 2001 consensus, females in India constitutes half of the country’s population and therefore we assume
Probability of getting fired is allowed to vary across the two sectors, which corresponds to the relative difficulty in firing workers in the formal sector (i.e. employment protection policies).
Assume instantaneous hiring, i.e. period t searchers can be matched and start producing in period t itself. This is a standard assumption in a sticky-price model, and seems reasonable if a period is interpreted as a quarter.
For this to hold, female labor participation in period t should be greater than the sum of female workers that are still employed from the previous period t−1, i.e.
One can interpret this as the male gender bias in employment which determines the extent of gender discrimination in employment. ωs,t = 0.5 implies no gender discrimination, whereas firms discriminate against females when ωst > 0.5 .
We assume zero cost of differentiation.
In order for households to be the natural lenders in the economy, they are more patient and hence are assumed to have a higher discount factor in comparison to entrepreneurs.
The higher the value of BPt , the more the male utility function is weighted in the overall household utility.
Christiano et al. (2014) use a similar home production function in their framework.
This corresponds to public provisions and infrastructure such as sanitation, access to water and electricity.
We normalise the value of foreign output by assuming
Substituting the LOOP condition, and
The need for such a friction is mainly technical, i.e. the country borrowing premium ensures that the model has a unique steady state and ensures stationarity.
For simplicity, we assume that the government does not invest in domestic or international bond markets, and do not take into account capital and consumption taxes.
Note that the female labor force participation rate is determined by the ratio of the number of female participants Pf, divided by the aggregate female population, pf in the economy. Similarly, the male labor force participation rate is determined by the ratio of the number of aggregate male participants Pm, divided by the aggregate male population, pm.
Calibration of substitution elasticity between males and females in home production is the same as the informal sector, i.e. ρH = ρI.
Since the informal sector largely consists of unskilled jobs, we assume that relative to the formal sector, the skill level of workers in the informal sector are lower and that males and females are equally skilled, i.e.
According to the Times User Survey conducted in 2010, female contribution towards unpaid domestic work in India is 10 times more than males. This unpaid work includes the inter-personal work for caring for other household members, and in countries like India with lack of sufficient infrastructure, the work of collecting water and fuel for household needs.
Fall in male informal employment is higher relative to their fall in formal employment, thus increasing overall male formality,