The Output Cost of Gender Discrimination: A Model-based Macroeconomics Estimate

Abstract

We use a growth model in which saving, fertility and labour market participation are endogenous, to quantify the cost that barriers to female labour force participation impose in terms of an economy's output. The model is calibrated to mimic the US economy's behaviour in the long-run. We find that a 50% increase in the gender wage gap leads to a 35% decrease in income per capita in the steady state. Using independent estimates of the female to male earnings ratio for a wide cross-section of countries, we construct an economy with parameters similar to those calibrated for the US economy, except for the degree of gender barriers. For several countries, a large fraction of the difference between the country's output and the US output can be ascribed to differences in gender discrimination.