Demand Effects of Gender Inequality in Wages and Female Bargaining Power
Posted: 27 Feb 2019 Last revised: 3 Jun 2019
Date Written: January 5, 2018
This paper examines the influence of gender inequality in the determination of effective demand in the US, the UK, Canada and Australia.
Focusing on consumption as a pathway to growth, the simple Keynesian construction of consumption behaviour is extended by introducing differences in the marginal propensity to consume out of male and female income. The methodology involves time-series estimation of consumption specifications. Building on micro-level evidence, we examine the long-run effects and short-run dynamics of gender wage inequality and female bargaining power on aggregate consumption.
Econometric evidence is presented that upward convergence of women’s wages to men’s has a substantial positive impact on aggregate consumption when household spending is assumed to be wage-constrained. This conclusion is especially true for the UK, the US and Australia; we do not find conclusive evidence to show that rising gender wage inequality had a dampening effect on the time path of consumption in Canada between 1975 and 2014.
Overall, the argument is made that, all things equal, improvements in the labour market conditions of women has an overall positive effect on aggregate household consumption expenditure and the short to medium term composition of aggregate consumption.
Keywords: Gender Inequality, Bargaining Power, Consumption, Aggregate Demand
JEL Classification: C22, E24, J23, J31, O40
Suggested Citation: Suggested Citation