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July 15, 2019

Can we use trade policy to achieve gender equality?

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Women consistently work less for pay and earn less than men. What policies work to achieve productive employment for all women and men, and equal pay for work of equal value? Trade policies can play an important role. We need to understand how they affect gender inequality, especially as we are witnessing an episode of increased protectionism after decades of rapid globalization.

Theory and empirical evidence suggest a number of channels through which trade policy can impact gender inequality in the labor market. These include technological change, changing job requirements, and structural change.

Trade liberalization exposes firms to increased foreign competition. In response, in order to increase their competitiveness, firms may invest in new technologies. At the same time, a reduction in import barriers will reduce the cost of importing capital goods, and thus make it easier for firms to acquire new technologies. If technological change reduces the physical strength required in manufacturing jobs, for example because they no longer involve heavy lifting, these jobs become more suited to women. Studies of the US and West German labor markets have shown that increased use of computers contributed to higher demand for female workers and a reduction in the gender wage gap. A study of Mexico’s manufacturing sector showed that the North American Free Trade Agreement induced technology upgrading by exporting firms, and increased the female share of blue-collar employment.

On the other hand, if exporting requires workers to travel on short notice or work particular hours (for example, in order to handle communications with clients in different time zones), gender inequality may increase, especially in high-skilled occupations. This will be the case if employers perceive that women are less committed workers than men, regardless of whether there are actual gender differences in commitment. Therefore, if trade policy improves access to foreign markets, we may see increased gender inequality in firms that enter the export market or expand their export activities.

Regarding structural change, if countries have a comparative advantage in female-intensive products, or if trade policies benefit female-intensive industries, trade can increase women’s relative employment and wages. This can be a very important channel, given the strong sectoral segregation of male and female workers that we see in virtually all countries. Women are more likely to work in textiles and apparel production, for example, whereas the production of motor vehicles is very male-intensive. The impact of trade policy on gender inequality thus depends on which industries benefit and which industries are hurt. It also depends on the extent to which male and female workers are substitutable, which itself can change in response to liberalization-induced technological change.

While there is no conclusive empirical evidence on these channels, and more studies would certainly help improve our understanding, it is clear that trade policy can have important implications for gender inequality. Policymakers should be aware of these implications, and understand that trade policy is not gender-neutral. They could in fact use their trade policies to work toward the 8th Sustainable Development Goal to ensure productive employment for all and equal pay for equal work.

© Janneke Pieters

Read Janneke Pieters’s IZA World of Labor article “Trade liberalization and gender inequality.”

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