The feminist political economy of the rent-seeking society: an investigation of gender inequality and economic growth.

AuthorBraunstein, Elissa

The question of why hierarchies evolve and persist is an old one in economics. Neoclassical treatments in what came to be known as the "new institutional economics" explain the evolution of hierarchy in the firm (Coase 1937) and the family (Becker 1991) in terms of their contributions to economic efficiency. Just as organizing production within a firm offers economic advantages over individual transactions in a spot market, so does the sexual division of labor contribute to increased efficiency in family production. Hierarchical institutions are explained primarily as solutions to coordination problems.

Challenges to this neoclassical "efficient institutions" paradigm have come from the neoclassical growth literature. That (for the most part) the industrialized world shares institutions such as democracy, political stability, relative income equity and the rule of law led some growth theorists to argue that certain equity-enhancing social institutions are preconditions for growth. These "neoclassical institutionalists" maintain that inefficient institutions can and do persist, much to the economic detriment of societies that harbor them. (1) What makes these approaches neoclassical is the presumption that growth-inhibiting institutions are largely the result of market imperfections, or, more vaguely, failures to respond to changing economic incentives.

Despite the centrality of social inequity in these approaches, there is no sense in which economic actors exercise power or collective action to create and maintain social norms and rules that are personally advantageous but socially costly. Perhaps it is the subliminal shadow of Adam Smith's invisible hand, but there is a persistent presumption that activities motivated by self-regard result in the greatest social good. This despite the work of several eminent neoclassical economists on rent-seeking, which posits that efforts to claim unearned revenues (albeit largely in the context of government interference in markets) can pose significant costs for growth (cf. Krueger 1974; Bhagwati 1982).

The question of the relationship between gender equity and economic growth is an instructive context for understanding the structure and implications of these contradictions. Even though gender practices are inherently about the exercise of power, that they have become a feature of the neoclassical growth and development literature alights on obvious tensions in the neoclassical institutionalist paradigm. By incorporating insights from both the rent-seeking and feminist economics literatures, we will present an alternative explanation of why gender hierarchies persist despite their obvious economic costs.

We begin with a review of gender in neoclassical growth theory, moving from traditional theories of factor accumulation to the new growth theory literature, which contends that institutions like gender matter for growth. Then we turn to a discussion of rent-seeking and offer a framework for understanding choice that admits the exercise of power and collective action. The primary context of this discussion is development and the processes of industrialization in the late twentieth century, as that is the focus of much of the growth literature.

Gender and Neoclassical Growth Theory

The Solowists

Open any textbook on economic growth and you are immediately ushered into the standard core of neoclassical growth models, Robert Solow's model of long-run growth (Solow 1956). As the basis of modern neoclassical growth models, Solow's is still a pretty good representation of how most economists think about economic growth, although human capital has since been added to the original model, which only included physical capital and labor supply. In the Solow model, income levels and growth are outcomes of two factors: (1) factor endowments and their accumulation, including capital (physical and human) and labor; and (2) productivity. Productivity is both the main driver of long-run growth rates and exogenous to the system, an issue that has attracted a lot of academic attention and to which we return below. Also note that this growth story is confined to the supply side of the economy; there is never deficient aggregate demand, involuntary unemployment or underemployment.

Women do have a unique place in these supply-side models, as women have long been acknowledged as a potential untapped labor supply for market growth, with little thought given to the implications of this transfer of labor for nonmarket production. This is illustrated by Arthur Lewis' treatment of the issue in his classic article on development with unlimited supplies of labor.

The transfer of women's work from the household to commercial employment is one of the most notable features of economic development. It is not by any means all gain, but the gain is substantial because most of the things which women otherwise do in the household can in fact be done much better or more cheaply outside, thanks to the large scale economies of specialization, and also to the use of capital (grinding grain, fetching water from the river, making cloth, making clothes, cooking the midday meal, teaching children, nursing the sick, etc.). One of the surest ways of increasing the national income is therefore to create new sources of employment for women outside the home. (Lewis 1954, 143) Lewis did acknowledge that the transfer of women's work from the household to the market would entail some costs, but this point would eventually lose its (albeit lesser) prominence in most other treatments of female labor supply as a source of factor accumulation.

A good example of this shift is represented by the oft-cited work of Alwyn Young (1995), whose contribution to an ongoing debate about the relative importance of factor accumulation versus total factor productivity growth in the East Asian miracle comes down squarely on the side of accumulation--and women are a significant source of it. Using a growth accounting framework to decompose the sources of growth, Young finds that for the period 1966-1990 rising participation rates contributed 1.0 percent per year to per capita growth in Hong Kong, 2.6 percent in Singapore, 1.2 percent in South Korea, and 1.3 percent in Taiwan (Young 1995, 644). Changing gender roles also factor into the East Asian accumulation story via the rapid postwar decline in fertility rates in the region, which in turn lowered dependency ratios and increased savings and investment. It is estimated that this "demographic gift" contributed between 1.4 and 1.9 percentage points to East Asian per capita GDP growth between 1965 and 1990, about one-third of growth over the period (Bloom and Williamson 1997). Like changes in productivity though, rising female labor force participation and the demographic gift are largely treated as exogenous shocks, existing outside and independent of the processes of economic growth. (2)

The Neoclassical Institutionalists

The simultaneous centrality and lack of a theory of technical progress in the Solow model spurred what came to be known as "new growth theory," which modeled the innovation process as endogenous. According to this perspective, factor endowments and productivity are themselves products of socioeconomic and natural structures and processes. Political institutions and global integration (or openness) garner most of the attention in these treatments, hence our term neoclassical institutionalists. The only truly exogenous factor is geography, which may directly affect growth via natural resource endowments such as land productivity or public health (as in the case of the prevalence of malaria). Geography also affects growth indirectly via its effects on global integration, as when a country is land-locked or endowed with significant shipping lanes, and via its effects on institutional development when the latter, for instance, bears the traces of colonial occupiers or the corruption often linked with an abundance of natural resources (Rodrik 2003).

Global integration and institutions shape one another in addition to the proximate processes of factor accumulation and productivity. For instance, developmentalist states shaped global integration in the case of the East Asian miracle, a type of integration that in turn partly determined the pace and structure of technical progress and factor accumulation in these countries. Of course, the term "institutions" refers to a large and complicated amalgam of factors. But for all intents and purposes most neoclassical institutionalists simplify this complexity by measuring institutional quality simply as the rule of law and property rights (Rodrik, Subramanian and Trebbi 2004).

Income inequality is a significant aspect of this research, as lower inequality is associated with institutional quality and consequent growth (Alesina and Rodrik 1994; Perotti 1996; Persson and Tabellini 1994). (3) The (mainstream) political economy explanation of the causal mechanisms from equity to growth is embedded in the neoclassical reasoning of markets and incentives. Perhaps the most familiar line of logic employs the median voter model to argue that higher levels of inequality result in the median voter being poor relative to a country's mean income, leading to political pressure for redistributive policies and consequent reductions in incentives to accumulate physical and human capital (Aghion, Caroli and Garcia-Penalosa 1999; Alesina and Rodrik 1994). Alternatively, imperfect capital and insurance markets inhibit the poor from making investments in physical and human capital. In such cases, redistribution from the rich to the poor can have positive net effects on output and growth (Benabou 2000). In all of these cases, income inequality is inefficient because it lessens incentives to invest and innovate. Is the same also true of gender inequality?

The Neoclassical Institutionalist Approach to Gender Equity and Growth

The short answer is yes...

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