an ex ante impact evaluation of increased labor force...

An ex‐ante

Impact Evaluation of Women’s Increased Labor Force Participation on

Poverty Reduction

Social Policy and Economic Citizenship Ministry of Foreign Affairs, Mexico City,

5‐6 August, 2010

Rania Antonopoulos Emel

Memis Armando Sanchez

The Levy Economics

Institute

Ankara University andLevy Economics Institute

UNAM, Department of

Economics

Outline

• Motivation and questions• Objective• Data and Methodology• Counterfactual Exercise I• Counterfactual Exercise II• Results • Concluding Remarks

Income Inequality and Poverty Indicators

• Income inequality, highest among OECD countries (OECD, 2009)

– Gini

(0.474)

– Interdecile

ratio P90/P10 (8.53)

• Poverty rate*(head count, ‐

2.5 dollar/day) – National (15 %)– Urban (10.1%)– Rural (33%)

*Source: Socio‐Economic Database for Latin America and the Caribbean (CEDLAS and The

World Bank), 2010.

Women Receive Less Income

Source: Socio‐Economic Database for Latin America and the Caribbean (CEDLAS and The

World Bank)

Women’s LFP is much Lower than that of Men


World Bank)

Gender Inequality in Paid Work Time and Gender Wage Gap


World Bank)

….Women Work Longer Hours

Source: ENUT, 2009Note: Working Age Population 14 <ages<65, weekly hours.

Employment Status

Note: All ratios are calculated as a share of total pop. age>14 years including inactive, not LF pop.

Total Unpaid Work Time by Employment Status

Source: ENUT, 2009Note: Working Age Population 14 <ages<65, weekly hours.

Close Links Between Unpaid Work Time and Poverty

Source: ENUT, 2009, Working Age Population 14 <ages<65, weekly hours.

Objective of Our Study

• Main research questions: 1.

What is the impact on income inequality and

poverty reduction if gender inequalities in LFP were eliminated at the national level?

2.

What would be women’s supply of labor response if paid work opportunities at a minimum wage were to be offered in rural areas

to poor households? And

3.

What would be the subsequent impact on poverty reduction?

Data Description

• Time Use Survey Data, TUS, 2009, INEGI Mexico.

• 17000 households at the national level, • Probabilistic, multistage stratified and

clustered sampling,• Time use information of people over 12 years

old are collected,• Mexican activity classification is used in order

to identify unpaid and paid work activities.

Data Description

• Employment indicators obtained from Mex‐TUS (INEGI, 2009) are compared withENIGH (Household Survey) and ENOE (LFS):

– LFP (over age 14): women (34 %) men (63%), – Unemployment rate (over age 14) is 4.4%,

• for women (3%), men (5.2 %)

– Rate of informal employment Def. I,• for women (45%), men (51%)

– Rate of informal employment Def. II, • for women (52%), men (56%)

Counterfactual Exercise I: Methodology

• Exercise I: If women’s LFP increases to match that of men?

• A modified methodology used by Costa, Silva and Vaz (2009): microsimulations

in eight LA countries

including Mexico • Elimination of gender differences in LFP• Elimination of gender wage gap• Elimination of gender based occupational segregation

• Using 2006 Household Survey data, they provide evidence showing that the elimination of gender differences in LFP results in higher reduction in poverty

and inequality in Mexico.


• Our contribution: introduce the impact of unpaid work time on LFP

– Step I: Estimation of the probability of participation in LF for women and men by

binomial logit

estimation

• Equation 1:


Individual participates in the LF if:

– Step 2: Equalize the probability of LFP of women and men (imputation step)

– Step 3: Estimation of the probability of being in informal, formal sector or being unemployed by multinominal

logit

estimation

• Equation 2:

) = P( = 1-F( = F(


– Step 4: Estimation of new individual income and household income by using two probabilities:

• Equation3:

• Equation 4:

– Step 5: Estimate impact on income distribution, by poverty and income inequality indicators.

, )

Counterfactual Exercise I ‐

ResultsActual Counterfactual

LFP of Working Age Pop.

14 < ages <65 years

Women 48% 72%

Men 87% 88%

Ratio of LFP (Women/Men) 55% 82%

Ratio of formality(Women) 45% 61%

Ratio of informality

(Women) 52% 32%

Rate of unemployment(Women) 3% 2,6%

Counterfactual Exercise I: Results

Note: For poverty line, 30th income quintile is used, which corresponds to food poverty income level.

Counterfactual Exercise II: Methodology

• Exercise II: What would be women’s supply of labor response if paid

work opportunities at a minimum wage were to be widely available

(i.e.

offered on demand) in rural areas to poor households? And what would

be the subsequent impact on poverty reduction?

• Assumptions:1.

4 hrs./day of work year round or 8 hrs./day for 6

months.2.

Minimum wage/day=54 pesos

3.

Similar rate of substitution between unpaid and paid

work time as those reported employed4.

None of the participating women are beneficiaries of any

social programs (Oportunidades, POPMI, Promusag

etc.)

Scenario I : presently inactive


• Step I: Verifying that the comparison groups (i.e. employed

vs. inactive) are homogeneous by propensity score matching

(PSM):

• Step II: Estimation of labor supply (Ls) response to a shock

of 54 pesos/ per day (wage elasticity of Ls of employed group)

controlling individual, demographic characteristics and

number of unpaid work hours:

where is the outcome of interest

and are the parameters of the distribution


• Step III: Imputation of wage elasticity to unemployed/inactive and informal employed

groups according to matched characteristics:


• Step IV: Calculation of hourly cost for a shock of one minimum wage (54 pesos/day):

• Step V: Identification of potential participants who are willing to participate in the program

and calculation of the wage cost of the program (scenario j):

Counterfactual Exercise II ‐

ResultsWomen Potential # of

Participants

Among Inactive

Monthly Cost (in million pesos)

Reduction in Rural

Poverty (Food

Poverty)

Scenario I (Inactive)

490,000 $ 490.00 From 39% to 24%

GDP (2009) (million pesos) 7,998,424

Social Spending (million pesos) (without

Health, education and Seguro

Popular

(2009)

486,881

Share of Social Spending in GDP 6%

Concluding Remarks

• This counterfactual exercise is a part of an INMUJERES study that contributes towards a

proposal of a gender equitable public employment social program

• The aim of the work presented here is to establish a proximate ex‐ante analysis on potential supply of

labor response and impact on poverty reduction• There are twenty different scenaria

we have

estimated and as such by changing several assumptions, results can provide evidence in

accordance to policy objectives’

specification.

an ex ante impact evaluation of increased labor force...

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