Summary of Proposal for Research Programme/Project Scheme

under ICSSR
Title : A Macroeconomic Investigation of Gender Equality in
Trade in the Framework of Globalization: The Indian
Case

Name and Address of the : Dr. Ishita Ghoshal

Scholar
Institution of Affiliation
Duration of the Study
Budget Proposed
Assistant Professor
Department of Economics, Fergusson College
(Autonomous), Savitribai Phule Pune University, Pune,
Maharashtra
8806725566
ishita.ghoshal@fergusson.edu
i.ghoshal87@gmail.com
: Fergusson College (Autonomous),
Savitribai Phule Pune University, Pune, Maharashtra
FC Road, Shivajinagar, Pune – 411004
020-67656000
principal@fergusson.edu
http://www.fergusson.edu/
: 24 months
: Rs. 14,60,000/-
(Fourteen lakhs and sixty thousand only)

Abstract of the Study:

The aim of this study will be to highlight the macroeconomic linkages between gender and
trade, in the context of the post-2015 development agenda and recommend policy reforms for
India. The study will examine the gender wage differential in India and decompose the same
to understand the sources and reasons for the existence of the gender wage gap in India. A
methodology suggested by Horrace-Oaxaca or the Oaxaca-Blinder methods will be used to
compute industry specific gender pay gaps and the relationships with trade-related measures
such as, tariff rates and trade shares will be examined econometrically. The study will
investigate whether trade liberalisation has any impact on gender wage gap with the use of
Difference in Differences techniques and other decomposition methods. The study also aims
to collect data related to behavioural aspects that may be leading to the existence of the wage
gap in manufacturing and service sectors in and round Mumbai and Pune in Maharashtra.

Objectives of the Study:

The aim of this study will be to highlight the macroeconomic linkages between gender and
trade, in the context of the post-2015 development agenda and recommend policy reforms for
India. To examine the gender wage differential in India and decompose the same to
understand the sources and reasons for the existence of the gender wage gap in India despite
the trade openness policies adopted by the economy. The study will investigate whether trade
liberalisation has any impact on gender wage gap after the implementation of the policy. The
study also aims to collect data related to behavioural aspects that may be leading to the
existence of the wage gap in manufacturing and service sectors in and around Mumbai and
Pune in Maharashtra.
The study aims at answering the following questions –
 What are the macroeconomic linkages between gender and trade in India?
 What is the extent of existence of gender wage gap in the economy?
 What are the economic factors responsible for the existence of gender wage
differential?
 Did the trade liberalisation policies of India affect the gender wage gap and whether
the effect was positive or negative?
 How do the employees (both males and females) and employers (while hiring males
and females) form wage expectations in the manufacturing and service sectors of
Mumbai and Pune?
 What are the behavioural factors that lead to the existence of the gender wage gap?

The Research Problem:

The extent to which trade may impact men and women differentially depends largely
on the gender ratio in the sectors that expand due to trade. The issue becomes more relevant
in case of developing countries like India where women start with a lower access and
participation in economically profitable activities. Since there are lower returns to female
labour, the gains of trade do not get fairly distributed. Further, trade often results in a
premium on skills. Thus, the resulting increase in the wage gap between skilled and
unskilled workers may increase the gender wage gap; given that in most countries the
average man has a higher level of labour market skills than the average woman.

Methodology in Brief:
The study would examine the gender wage differential in India from 2004-05 to 2017-18.
The methodology consists of the specification of separate male and female wage
determination processes. OLS is applied to the wage determination equations yielding
unbiased coefficient estimates for the explanatory variables. The OLS procedure allows for
the decomposition of the overall gender pay gap into endowment and treatment components
using the conventional index number decomposition. A methodology suggested by Horrace-
Oaxaca or the Oaxaca-Blinder methods will be used to compute industry specific gender pay
gaps and the relationships with trade-related measures such as, tariff rates and trade shares
will be examined econometrically within a GLS framework. Moreover, the study would like
to investigate whether trade liberalisation has any impact on gender wage gap after the
implementation of the policy. We propose the use of Difference in Differences techniques
and other decomposition methods. The study also aims to collect primary data related to
behavioural aspects that may be leading to the existence of the wage gap. A primary survey
of employees (both genders) will be conducted to ascertain their expectations towards wage
and type of employment. A survey of the employers will be carried out to understand the
difference in wage offers made by them to male and female workers. The study will attempt
to integrate an experimental approach to the primary surveys conducted to capture the
process of expectation formation. Both the surveys will try to capture the behavioural reasons
for both the stakeholders in maintaining the wage gap. The survey will be exploratory and
purposive in nature.
Proposal for Research Programme/Project Scheme under ICSSR
by Dr. Ishita Ghoshal
Discipline of the Project: Economics

Title: A Macroeconomic Investigation of Gender Equality in Trade in the Framework

of Globalization: The Indian Case

Background and Aim of the project:

The extent to which trade may impact men and women differentially depends largely
on the gender ratio in the sectors that expand due to trade. The issue becomes more relevant
in case of developing countries like India where women start with a lower access and
participation in economically profitable activities. Since there are lower returns to female
labour, the gains of trade do not get fairly distributed. Further, trade often results in a
premium on skills. Thus, the resulting increase in the wage gap between skilled and
unskilled workers may increase the gender wage gap; given that in most countries the
average man has a higher level of labour market skills than the average woman.

McKinsey Global Institute (2015) found that US$12 trillion could be added to global GDP by
2025 by advancing women’s equality. The analysis maps 15 gender equality indicators for 95
countries that hosts 93 percent of the world’s female population and generate 97 percent of
global GDP. The study finds that 40 of the 95 countries have extremely high or high levels of
inequality on half or more of the 15 indicators. India has a score of 0.48 where 1 stands for
parity. Women are reported to comprise half the world’s working-age population but have
been generating only 37% of GDP. 75% of unpaid work is done by women all around the
world. The full-potential scenario (where there is perfect gender equality) would increase
annual GDP in 2025 by more than 20 percent over a business-as-usual case for 74 of the 95
countries analyzed. The analysis suggests that India may be able to enjoy the highest
potential boost if full potential is achieved.

Trade policy that helps bridge the gender gap is a vital means to enhance work participation
rate and returns to labour in the tradable and other sectors of the economy. The Millennium
Development Goals (MDGs) have also emphasized on gender equality (Goal 3) and global
partnership for development (Goal 8). However, the objective of establishing a equitable
trading system which bridges the gender gap, is yet to be attained.

The Declaration on Trade and Women’s Economic Empowerment was initiated on the
occasion of the WTO Ministerial Conference in Buenos Aires in December 2017 by the
governments of Iceland and Sierra Leone, as well as the International Trade Centre. The
declaration serves as a catalyst seeking to remove barriers to - and foster - women’s
economic empowerment.119 members of the WTO had signed on to this declaration
representing 72.5 percent of WTO members. Through the declaration, signatories agreed to
find ways to best address barriers to trade, lack of access to trade financing and low
participation of women in public procurement markets. Participating members would have
the advantage to exchange information about what has worked (and what has not) in their
attempts to collect gender-disaggregated data and to encourage women’s participation in the
economy. The commitments are targeted to reduce trade barriers for women through
knowledge sharing and collecting gender-disaggregated data which, in turn, advances gender
equality and women’s economic empowerment through trade.

“The effect of trade policy on economic and social activities tends to be different between
men and women as they have different economic and social roles and different access to and
control over resources, due to socio‐cultural, political and economic factors. Women tend to
be more affected by the negative side-effects of trade liberalization and are facing bigger
challenges than men when it comes to taking advantage of the opportunities trade offers. This
situation is due to gender biases in education and training, gender inequalities in the
distribution of income and command over resources, as well as unequal access to productive
inputs such as credit, land, and technology, which translate into significant gender differences
in occupational distribution”. (UNCTAD, 2009)

The aim of this study will be to highlight the macroeconomic linkages between gender and
trade, in the context of the post-2015 development agenda and recommend policy reforms for
India. To examine the gender wage differential in India and decompose the same to
understand the sources and reasons for the existence of the gender wage gap in India despite
the trade openness policies adopted by the economy. The study will investigate whether trade
liberalisation has any impact on gender wage gap after the implementation of the policy. The
study also aims to collect data related to behavioural aspects that may be leading to the
existence of the wage gap in manufacturing and service sectors in and around Mumbai and
Pune in Maharashtra.

Review of Literature:
Busse and Spielmann (2006) examine the international linkages between gender inequality
and trade flows for 92 developed and developing economies. They focus on the comparative
advantage in labor‐intensive manufactured goods. The study reveals that comparative
advantage in labor‐intensive goods has a positive effect on gender wage inequality. Countries
with a larger gender wage gap have higher exports of these goods. Gender inequality in labor
force activity rates and educational attainment rates isfound to be negatively linked with
comparative advantage in labor‐intensive commodities.

Papyrakis et al (2009) study the available theory and evidence on how trade liberalisation and
gender inequality in income are linked, as well as two of the latter's key underlying
determinants: wages and employment. The study finds that in developing countries, trade
expansion has positive effect on female employment, both relative to male employment and
in absolute terms, although largely concentrated in unskilled manufacturing. However, free
trade is found to widen the gender wage gap.

Menon and Rodgers (2009) check whether relative wages and employment of women in
India have been affected by trade liberalisation and the competitiveness that liberalisation
brought along. The study incorporates the Neoclassical idea of competitive markets leading
to lowering of discrimination against female workers into a model and test the same with data
from 1983 to 2004. The results reveal that trade openness has led to widening wage gaps in
India in the manufacturing sector.
UNCTAD (2013) reports that the effects of trade on men and women are not clear-cut, and
impacts areoften double-edged, as women may simultaneously gain and lose from trade.
Women may obtain stable wage employment, but still have low-paying jobs and remain
crowded in the lower nodes of the sector; women may gain asconsumers when agricultural
tariffs are reduced, but may lose as producerswhen the prices of agricultural commodities fall
(UNCTAD).

A United Nations (2012) study found evidence suggesting the existence of significant gender-
related barriers, which restrict or distort trade. These barriers are reported to be missed trade-
related opportunities for economic growth in national and international economies.
If these barriers are removed, then it may turn out to be beneficial to women’s economic
empowerment and gender equality. The report states that if female farmers in developing
countries had the same access to productive resources as men, their farm yields would grow
by 20 to 30 percent; total agricultural outputs would rise by 2.5 to 4 percent in those
countries; and the number of people affected by hunger would decrease by 12 to 17 percent.

Zarrilli (2017) notes that there are at least two ways to make trade policy more gender-
responsive: ex ante gender assessments of trade measures; and the inclusion of gender-related
considerations in trade instruments. A combination of these should be used to yield the best
results. According to Zarrilli, prior to introducing new trade measures such assessments
should be conducted. The author argues that “gender-related considerations should be
included in the text of trade instruments such as trade agreements”.

Seguini (2009) notes that despite equality in education and employment opportunities
improving a country's growth, the benefits may be overshadowed by the industrial strategies
of a number of semi‐industrialized countries that practice an export strategy relying on
labour‐intensive goods that are produced by cheap female workforces, taking advantage of
gender wage inequalities. This kind of strategies stimulate profits, investment and exports in
the short run, however, it turns out to be counter‐productive in the longer run.

There is conclusive evidence that economic development and social equality tend to go
together (ECLAC, 2010).
Alesina (1994) studied the determinants of economic growth and found that economieswith
lower income inequality and gender discrimination grow faster.

A strong correlation was found between gender equality (measured by economic

participation, education, health and political empowerment), competitiveness and GDP per
capita (The Global Gender Gap Report, 2010).

Various studies have examined the nature of growth that could be achieved with trade
focussing on evidence that indicates regarding the labor force employed in the export sectors
of semi-industrialized countries being characterized by concentration of women in
increasingly casual, irregular and flexible forms of employment (Joekes and Weston 1994,
Mehra and Gammage 1999).

Studies by Standing (1999) and Grown, Elson and Cagatay (2000) reveal that feminization of
the export labor has also not had a significant positive impact on the gender wage gap.
Research Questions:
 What are the macroeconomic linkages between gender and trade in India?
 What is the extent of existence of gender wage gap in the economy?
 What are the economic factors responsible for the existence of gender wage
differential?
 Did the trade liberalisation policies of India affect the gender wage gap and whether
the effect was positive or negative?
 How do the employees (both males and females) and employers (while hiring males
and females) form wage expectations in the manufacturing and service sectors of
Mumbai and Pune?
 What are the behavioural factors that lead to the existence of the gender wage gap?

Methodology:

The study would examine the gender wage differential in India from 2004-05 to 2017-18.

Data Source for the secondary data for macroeconomic variables - Indian National Sample
Survey (NSS) for wage, employment and other socio-economic information. The tariff
data is to be extracted from UNCTAD - TRAINS (Trade Analysis and Information System)
data base

The methodology consists of the specification of separate male and female wage
determination processes. OLS is applied to the wage determination equations yielding
unbiased coefficient estimates for the explanatory variables. The OLS procedure allows for
the decomposition of the overall gender pay gap into endowment and treatment components
using the conventional index number decomposition.

A methodology suggested by Horrace-Oaxaca or the Oaxaca-Blinder methods will be used to

compute industry specific gender pay gaps and the relationships with trade-related measures
such as, tariff rates and trade shares will be examined econometrically within a GLS
framework. The Oaxaca-Blinder Decomposition is used to explain the gap between the
means of an outcome variable between two groups. Such decomposition has been extensively
used to study the levels of discrimination in the labour market associated with differential
wages for different groups of labourers especially between males and females.

One of the earliest instances of use of this methodology was to find the level of
discrimination between males and females in urban labour markets of the Unites States of
America (Oaxaca, 1973). Later this study would be extended to include four alternative
methods of estimating the extent of labour market discrimination, at the root of all four of
which was this method of decomposition to show that the discrimination prevalent in the
labour markets not only lowers the wages of minority groups but also led to higher pay for
other groups (Oaxaca & Ransom, 1994).

Such a methodology was also utilised to find wage differentials between people of colour and
the white population (Blinder, 1973). Later on, it found more and more application in wider
areas of labour market studies. Researchers found the presence of 60% income differentials
between rural migrants and urban residents using the Oaxaca-Blinder Decomposition (Deng,
2007). Lately it has found application in areas beyond just the labour markets, with it being
used to analyse all sorts of differences such as the study of disparities in occurrence of
obesity depending on both race and gender (Sen, 2014).

The Oaxaca-Blinder Decomposition method has been further developed by various authors to
develop techniques to addresses various of problems such as the identification of effects of
predictors in the detailed decomposition or the estimation of appropriate standard errors to
utilize (Jann, 2008). Other studies have extended the use of Oaxaco-Blinder Decomposition
method to include other distributional statistics besides the mean such as quantiles, variance
and the Gini coefficient and have hence greatly extended its scope(Fortin et al., 2011).

However, it is not without its shortcomings. This technique encounters issues when it comes
to calculation of separate contributions to discrimination for indicator variables. This results
from the fact that changes in reference groups cause changes in the robustness of the
contributions. However this can be handled by extending the model a bit and introduction of
dummy variables making the coefficients effect invariant to the choice of reference group
(Nielsen, 2000).

This method divides the average gap into two summations- the first one shows the differences
which are explained by the models and the second consists of unexplained differences within
the model and it is this latter part which represents an estimation of the discrimination which
exists between the two groups (Oaxaca & Ransom, 1999). Hence the goal of this method is
to decompose the differences in means of the variable being studied across the two groups.
This can be achieved by estimating linear regression equations for the outcome variable of
the two groups, for example, that of wages of men and women.

Moreover, the study would like to investigate whether trade liberalisation has any impact on
gender wage gap after the implementation of the policy. We propose the use of Difference in
Differences techniques and other decomposition methods. Difference in Difference (DID) is
usually used to estimate the effect of a particular intervention by comparing the changes in
outcomes over time between a population that is enrolled in a program (the treatment group)
and a population that is not (the control group). In this project it will be utilised to see the
effect of trade liberalization on the wage differentials pre and post the trade liberalisation era.
DID is being utilised because recent studies have concluded that the standard matching
estimators method is generally found to be lacking, but in combination with DID
methodology it can greatly improve the results obtained from non-experimental evaluations
(Blundell & Costa Dias, 2005).

Another advantage of using the DID method is that any attempt to compare the association
between a policy change and any outcomes following it in a conventional pre-post
assessment will be invalid if there exist any underlying time dependent trends in the
outcomes; The DID method tackles this often-occurring problem by comparing the changes
to a control group which is experiencing similar trends but is not undergoing similar policy
changes. This has especially been utilised for this reason in the medical field to see effects of
changes in duty hour policies on various aspects (Patel et al., 2014; Rajaram et al., 2015)
Wages of skilled and unskilled workers have been studied for causal effects of a foreign
acquisition using the DID estimators in this manner (Girma & Görg, 2007).
In particular DID has been used in relation to trade liberalization studies to identify trade’s
effect on income dispersion and its convergence pattern among various countries before and
after liberalization (Slaughter, 2001).

Further development of DID methodology was done to deal with smaller number of groups
and when some of the variables are fixed within the group by use of two step estimators
instead (Donald & Lang, 2007). This was extended even further later on by others to study
use of DID methodology for a small number of policy changers using information from a
large sample of non changing groups; and while the treatment effect estimators derived were
not consistent, it did show methods for using the treatment point estimators as test statistics
and building confidence intervals using test statistic inversion (Conley & Taber, 2011).
While generally DID would rely on the control group having no benefits of the policy further
papers have discussed methodology to include models which allow for the control group and
the treatment group to have different average benefits from the intervention (Athey &
Imbens, 2006).

The study also aims to collect primary data related to behavioural aspects that may be leading
to the existence of the wage gap. A primary survey of employees (both genders) will be
conducted to ascertain their expectations towards wage and type of employment. A survey of
the employers will be carried out to understand the difference in wage offers made by them to
male and female workers. The study will attempt to integrate an experimental approach to the
primary surveys conducted to capture the process of expectation formation. Both the surveys
will try to capture the behavioural reasons for both the stakeholders in maintaining the wage
gap. The survey will be exploratory and purposive in nature.

The survey will be concentrating on manufacturing and service sector in and around Mumbai
and Pune in the state of Maharashtra. The list of organisations for the manufacturing industry
will be identified from Maharashtra Industries Directory which lists manufacturers under
eight categories. The study will attempt to cover samples from each of the categories, giving
preference to the top sub-categories in each. Specifically, the study will refer to Mumbai
Business Directory and Pune Business Directory to identify the top contributing sub-
categories under each of the following categories – mechanical engineering, electrical &
electronics, machinery, chemicals, metallurgical, plastic & rubber, service to industry and
packaging.

The service sector includes the following components - Information Technology, Trade,
Education, Financial services, Media, Hospitality, accommodation & food services,
Entertainment, culture & recreation, Transportation & warehousing, Storage,
Communication, Healthcare & social assistance, Tourism, Public utilities, Real estate &
leasing, Public administration & defence, Business support services and Professional,
scientific & technical services. Out of the components mentioned above, the study will focus
on Information Technology and Financial Services sub-sectors and the trade components
associated with the two as they are likely to be the biggest contributing components to the
tertiary sector of Maharashtra. Data on companies/organisations under the two chosen sub-
sectors will be collected to identify the top contributing players in the market and
subsequently the survey will be conducted based on the same.
Implications of the project:

The study will try to utilise the results to identify the economic and behavioural reasons
behind the sustenance of the wage gap and provide insight into policy implications. Such
results may be useful for framing policy more effectively towards reducing the existing
gender wage gap that will eventually pave the way for effective and sustainable growth along
with development of the economy as well. This may also help in framing trade policies that
will be more inclusive in gender aspect and ensure that the women enjoy more opportunities
and higher pay than what they are experiencing currently.

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