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 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 Ostry

Jonathan D. Ostry is Professor of Economics, Global Affairs and Public Policy at the University of Toronto, jointly appointed to the Department of Economics and the Munk School of Global Affairs & Public Policy. He is a non-resident fellow at Bruegel, a Research Fellow at the Center for Economic Policy Research (CEPR) in London and serves on the advisory board of the World Economic Forum's Global Risk Report in Geneva. Ostry previously served as a Professor in the Department of Economics at Georgetown University in Washington DC and in various senior roles at the International Monetary Fund, including as Deputy Director of the Research Department and Acting Director of the Asia and Pacific Department. Professor Ostry received his PhD in Economics from the University of Chicago, an MSc from the London School of Economics and a BA in PPE from Oxford University.

Professor Ostry’s recent academic and policy work has focused on the management of international capital flows; this work has been influential in bringing about a shift in the institutional position of the IMF on capital controls. Ostry has also published influential studies on the relationship between income inequality and economic growth, where his work suggests that high income inequality and a failure to sustain economic growth may be two sides of the same coin. Ostry’s work has also focused on the issue of fiscal sustainability, and in particular on the role of a country’s track record of fiscal management in determining access to international capital markets. This work is used by the main credit rating agencies for their sovereign credit rating analysis.

Professor Ostry is a highly cited economist in scholarly journals (ranked in the top 1 percent of economists worldwide over the past ten years, according to RePEc), and his writings have featured prominently in the financial press (the Economist, the Financial Times, the New York Times, the Washington Post, the Wall Street Journal, Bloomberg, Time, Forbes, Fortune, CNBC, NPR, and the BBC). Earlier in his career, Ostry led the team at the IMF that produces its flagship publication, the World Economic Outlook, and was mission chief for Japan. His recent books include Taming the Tide of Capital Flows (MIT Press, 2018) and Confronting Inequality (Columbia University Press, 2019).