Does gender equality, beyond its inherent value, cause economic growth?

This is hard to study in cross-country data, but here is a new and smart approach.

A short thread on a new @IMFnews paper by @atabertay @DordevicLj and @Can_Severr —> https://ssrn.com/abstract=3658594

Across countries or over time, any positive relationship between gender equality and growth could arise simply because economic growth produces more gender equality.

The authors nicely deploy a powerful identification strategy due to Rajan & @Zingales: https://www.jstor.org/stable/116849 

They use *within* country variation in female employment across industries, interacted with across-country (but industry-constant) measures of gender inequality, such as maternal survival and girls' education.

The hypothesis is that if gender equality adds value to an economy, value-added in a *country* with greater gender equality should be relatively higher *for that country* in an *industry* that employs more women.

This smartly controls for the most obvious forms of reverse causality: Growth in a country's value-added could easily produce e.g. higher girls' education, but it is harder to see how country-relative growth in a *sector's* value added could shape nationwide girls' education.

The negative coefficient on the interaction term implies that the relationship between gender *inequality* and sectoral value-added is more negative when that sector employs a greater share of women.

In other words, it is not just that countries with greater gender *inequality* have lower economic performance.

It is that sectors in a country with greater gender *inequality* perform worse when they are relatively more exposed to the limits that inequality places on women's ability to realize their economic potential, such as by harming their health and education.

There are things left to discuss, of course. Do we believe the Rajan-Zingales assumption that the relevant characteristics of industries are indeed fixed across countries?

Nevertheless this paper is a nice step forward on a very important question.