Gender diversity and economic growth

The gains from gender inclusiveness are likely to be much larger than standard economic models estimate

Publishing date: 24 February 2025
Authors: Jonathan D. Ostry

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Most macroeconomic and growth accounting models assume that male and female workers are perfectly substitutable in the aggregate production function. Whether this assumption is valid is an empirical question that this paper aims to answer by estimating the elasticity of substitution between female and male labour. We apply linear and non-linear techniques to firm-level data, cross-country sectoral data and cross-country aggregate data. We find that women and men are far from being perfect substitutes in production, a result that is consistent with much microeconomic evidence, but has not permeated to macroeconomics. The failure to account for imperfect gender substitutability has far-reaching implications. In particular, standard growth accounting exercises are likely to attribute to technological progress gains that are more properly attributable to the impact of greater gender inclusiveness in the labour force over time. Put differently, the gains from gender inclusiveness are likely to be much larger than standard economic models estimate.

Helpful comments from Jorge Alvarez, Shankha Chakraborty, Doug Gollin, Gita Gopinath, Duygu Güner, Narayana Kocherlakota, Christine Lagarde, Petia Topalova and seminar participants at the International Monetary Fund are gratefully acknowledged. Thanks also to Grace Li for sharing the Chinese manufacturing data, and to Zidong An and Marina Conseca Martinez for outstanding research assistance. This work benefited from the financial support of the Munk School of Global Affairs and Public Policy at the University of Toronto and the UK’s Foreign, Commonwealth and Development Office. The views expressed in this paper are those of the author solely and should not be attributed to institutions with which they may be affiliated.

About the authors

Jonathan D. Ostry

Jonathan D. Ostry is a Non-resident Fellow at Bruegel. His research focuses on economic growth, inequality, trade and capital flows, climate and gender.

Recent contributions include the nexus between income inequality and growth; the political economy of structural and climate policies; the growth benefits of gender inclusion; trade and capital flow policies; and the role of the IMF. His recent books include Confronting Inequality (Columbia University Press), Taming the Tide of Capital Flows (MIT Press) and Sovereign GDP-Linked Bonds: Rationale and Design (CEPR Press). He consistently ranks in the top 1 percent of economics citations globally over the past decade.

He speaks English and French.

He is Professor of Economics, Global Affairs and Public Policy at the University of Toronto, a Research Fellow at the Centre for Economic Policy Research (CEPR) and Senior Fellow at the CD Howe Institute. Previously, he served in senior roles at the International Monetary Fund, including as Deputy Director of the Research Department and Acting Director of the Asia and Pacific department. He holds a PhD in Economics from the University of Chicago.