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Modeling Gender Effects of Pakistan’s Trade Liberalization

Rizwana SiddiquiPakistan Institute of Development Economics

Perspectives on Impact evaluationCairo Conference, Egypt March 31, 2009

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Outline

Introduction

Methodology – Gender Sensitive CGE

Data - Gender Sensitive SAM

Simulation Results

Conclusion

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Introduction

Gender Inequalities in Pakistan women are– Less fed – Low health status– Less educated– Less mobile– Located in low paid jobs– Wage rate is low – Market work under estimated– Household work is completely ignored– Over loaded by Work

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cont….

• Bias in Intrahousehold Allocation of Resources

• Bias in Division of Labour

Constraints Men and Women Face Differ

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Policy Effects

Trade Liberalization and Gender Effects

– Change in structure of employment and prices

• Time Allocation

• Consumption

• Incidence of poverty- time, capability, income

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ObjectiveThe objective of the present study is to

measure gender dimensions of effects of Trade Liberalization in Pakistan using a comprehensive frame work that takes into account:

– Market work, household work, leisure

– Men and Women Labour

– Consumption of men and women

Measure effects using gender based poverty indicators

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Development of Gender Aware CGE

1. Production – Integrate market and non-market sectors

2. Labour by gender

3. Rigidities

4. Consumption by Gender

5. Poverty Indicators by Gender

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DATAConstruction of Gender SAM

1. Traditional SAM-based on market economy

2. Integration of Market Economy and Household Economy

3. Female Participation Adjusted with new data

4. SNA Classification is used to Categorize market, household, and leisure

5. Evaluation of Non Market Work—Opportunity cost of labor

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AssumptionsAll activities are separable

Minimum time required for self care is 10Hours/d

Rest of the hours/d are distributed between Market, Household and Leisure activities

Households Produced Goods are consumed by Households themselves

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Structure of SAM-1990 Market Sector (20)—Agriculture (5) , Industry ( 9)

Services ( 7)

Non Market Sectors(18)— Nine categories of households are identified with nine social reproduction sectors and nine leisure sectors

Factors of Production—Labor (8)—Grouped by Gender and education

—Capital By Sector

Households(9)—4 Urban by education level of hh and 5 Rural by Gender and then male head hh by employment status.

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Salient Features of Gender SAM

1. It makes invisibility of women's household work visible.

2. Hidden market work: Improved female participation- female participation in the market is over 50 % instead of 12%

3. Female labour increases from 3.1 million (OLD) to about 15 million

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Female Labour Force Participation Rate (based on

old and new data collection techniques)

0

10

20

30

40

50

1 2 3

years

FLFP

R (%

)

Series1 Series2

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Time Allocation between market and non market

activities Women

Urban• Market – 26.5 to 40 %• Household- 34.1 to

45.3%• Leisure- 10 to 20 %

Rural• Market-34.1 to 45.3 %• Households-35.9 to

47.3%• Leisure-10 to 20%

MenUrban • Market – 50.6 to

57.4%• Household- 2.9 to10.7

%• Leisure- about 40%

Rural• Market- 47.5 to 53.3%• Households-1.6 to

16.8%• Leisure-about 40 %

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Time allocation by Gender in Market Economy

Male Labour in hours Female labour in hoursSectors No-

Education

Low-Educati

on

Med-Educat

ion

High-Educat

ion

NoEducati

on

LowEducati

on

Med-Educati

on

HighEducat

ionCrop* 39.5 21.3 21.8 7.9 66.2 55.5 51.9 0.0Live Stock

11.5 6.5 5.9 1.8 10.0 11.2 6.5 0.0

Textile 6.3 6.5 7.9 3.9 9.5 18.6 19.7 27.0

Machinery 1.8 4.3 3.4 2.0 0.0 0.0 0.0 0.5

Public Administration**

8.0 13.2 16.8 31.5 4.3 0.0 0.3 13.3

Education and Health**

1.4 2.3 4.3 13.5 1.3 0.0 0.9 26.7

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yHousehold Reciepts by Source and Poverty

020406080

100120140160

No

Educ

atio

n

Low

Educ

atio

n

Med

ium

Educ

atio

n

Hig

hEd

ucat

ion

Empl

oyee

Fem

ale-

Hea

ded

Hou

seho

lds

Self-

Empl

oyed

Oth

er

Empl

oyer

Household

shar

e (%

)

Labor Capital Dividends Govt Transfers Remittances Poverty

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Structure of Demand• Inequality in Consumption by Region

• Rural households (70%)—Consumption 52%.

• Urban households (30%)—Consumption 48 %.

• Household and Intermediate consumption account for over 85.4% of total demand

• Exports—6.6 %

• Investment—8 %

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Consumption by Gender• An equation based on Working Engel Curve

• Where w is share of good i, x total expenditure, n household size, F number of adult equivalent males and number of adult equivalent females

• We calculated out lay equivalent ratio for both male and females.

• Where G = F and M

iunxFMw ii )/ln(21

nx

xqGq

i

jiijG

/

/

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Intra Households Allocation of Resources

Significant Difference - food, clothing, education and health consumption of men and women. Other commodities are like public goods which are consumed by men and women equally, i.e., housing, sanitation facilities and utilities such as water, electricity, and gas etc.

Using Following Ratio Household Consumption Disaggregated by gender

MF

Ff CC

Ca

MF

Mm CC

Ca

where af + am =1

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Intra Households Allocation of Resources Urban

Crop-(Vegetables, and cereals) –ALL HH-W

Live stock & poultry-all hh Men

Cloth- Poor- MenRich-women

Education and Health• Poor-female• Rich-male=female

Rural

Crop and Live StockMen > Women

Clothing vary by type of hhRich – Women Poor-Men

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CGE ModelProduction - 3

Market sectors—TwentyHouseholds Social Reproduction—Nine

Leisure—Nine

Labor by gender and by education levelMen-(4)—No education, below primary, 5-9 years,

Ed>10Women-(4)—No education, below primary, 5-9

metric, above

Consumption of MenWomen

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Cont…

• It is assumed that non market sectors, leisure and reproduction, behaves like market sectors.

• Household consume all goods produced social reproduction and leisure

• Price of non market goods is the opportunity cost of labor used in these activities.

• Market rigidities are introduced by keeping low elasticities of substitution

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Consumption of Market and Non-Market Goods

Maximizing Stone-Geary utility function

• S.t

• Income constraint • Time constraint

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Other Features of the MODEL• Goods with same sectoral classification are different in

qualities for domestic markets and foreign markets.

• Imports and domestically produced goods are imperfect substitutes.

• CES and CET functions describe substitution and transformation possibilities reflecting empirical realities, respectively, for the above two functions.

• Model is calibrated to SAM data using parameters estimated from SAM and econometrically estimated elasticities.

• Model is solved using GAMS software.

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Closure

CAB and Nominal exchange rate are constant and real exchange rate adjust to keep the balance.

Government consumption and Investment are kept fixed in real term for welfare and poverty analysis.

Savings equal Investment

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Poverty and Welfare AnalysisA. Capability Poverty Indicators-• 1. IMR—Measure satisfaction of at least 4 basic

needs

• 2. LR—Education

hHEPC

hPC

base

CGCHAIMRIMR

IMRIMR __min

min **1)(

eHEPCCGe

PCCHA

LRLRLRLR

base

_*_*1

)max(max

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Cont…

• Income Poverty—Absolute and Relative— Absolute - FGT Indices — Relative Women share in poor population

•Time Poverty—Absolute and Relative —Change in leisure of men and women over base

value —change in leisure of women relative to men

Welfare -- EV-based on consumption of market goods

– EV-based on consumption of market and non market goods

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Simulation: Revenue Neutral Trade Liberalization

• Tariff Reduction

• Sales tax increases

Figure 1. Custom Duties and Sales Tax as Percentage of Government Revenue

0

5

10

15

20

25

30

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1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Year

Percentages

Custom duties Sales Taxes

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Variation in Macro Aggregates

Sectors M/Q E/Xs

Trade Liberalization

PC PM Q D M E VA

Agriculture 3.5 1.05 -1.32 -2.45 -0.21 -0.27 1.47 3.5 -0.23

Industry 26.8 15.2 -4.01 -8.48 0.03 -1.18 3.41 4.34 -0.19

Textile 3.8 42 -2.2 -5.4 1.2 1.0 4.7 4.6 2.6

Machinery 61.5 3.5 -8 -9.5 1.2 -2.4 3.5 6 -2.1

Services 4.9 6.1 -1.8 0.66 -0.39 -0.08 -2.98 2.22 -0.19

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Factor Market Effects

Market Sectors

Female Labour Male Labour  

No Low Med High

Total

No LowMediu

m High

Total

Total Lab

Edu Edu Edu Edu Edu Edu Edu Edu

Agriculture 0.2 -1.9 -2.5 0 -1.12 0.91 -2.4 -0.66 -4.57 -0.1 -0.42

Textile 7 4.7 4.2 1.8 4.34 7.9 4.5 6.4 2.4 6.12 5.3

Chemicals -6.1 0 -9.2 -10.7 -9.21 -5.4 -8.1 -7.2 -10.2 -8.54 -8.6

Non-Metallic -6.3 0 0 0 -6.28 -5.5 -8.2 -7.7 -10.4 -6.39 -6.4

Metallic 0 0 0 0 0 -8.6 -11.2 -10.7 -13.3 -11.62 -11.7

Industry 6.24 4.65 1.72 -0.68 2.17 1.04 -1.91 -0.43 -5.64 -1.21 -0.41

Services -4 -1 -1.7 -3.5 -2.66 3.9 0.9 1.5 -1.5 -0.31 -0.54

Total 0.84 -0.99 -1.62 -2.34 -0.73 -1.2 -4.2 -2.6 -6.2 -0.4 -0.47

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Labor to Non Market Activities Household

Social Reproduction Leisure

Urban households 0.48 1.8No-Education -1.5 -0.8Low-Education 4 6.4Med-Education 0.3 1.6High-Education 3 3.9Rural households -0.45 -1.4Employee Male -1.6 -1.8Female-Headed 2.8 4.8Self-Employed -1.1 -1.4Other -1.2 -1.5Employer -0.8 1.2Total -0.02 0.16

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Variation in Wage Income, Expenditure and CPI

Household

Women wage Incom

eMen Wage

Income CPI

Household Expenditu

reUrban 2.7 1.3 -1.6 1.06No-Education 1.3 -1.2 -1.6 -1.7Low-Education 2.6 0.9 -1.6 3.5Med-Education 3.0 0.5 -1.7 0.8High-Education 4.1 4.1 -1.6 4.1Rural 1.1 -0.3 -1.7 -0.35Female Headed

hh 0.8 -0.3 -1.7 1.6Employee 1.5 0.0 -1.7 -1.6Self-Employed 0.9 -0.5 -1.7 -1.5Other 2.0 0.7 -1.8 -0.7Employer 5.2 1.8 -1.7 1.7Total 1.9 0.5 1.7 0.34

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Poverty and Welfare

HouseholdHead

CountPoverty

Gap SeverityWelfare

(EV)1 Welfare

(EV)2No-Education 3.7 5.6 6.9 -0.01 -0.03

Low-Education -11.8 -11.1 -12.5 0.03 -0.03

Med-Education -1.5 -1.2 -3.6 0.01 -0.02

High-Education -14.0 -13.8 -13.3 0.03 0

Urban households -3.6 -2.6 -2.5 0.01 -0.037Employee Male 3.0 6.2 7.7 -0.01 -0.02

Female-Headed -3.3 -5.6 -5.9 0.02 -0.05

Self-Employed 2.8 5.2 5.6 -0.01 -0.04

Other 1.7 2.2 7.1 -0.01 -0.03

Employer -3.5 -5.4 -8.3 0 0

Rural households 2.3 4.5 5.7 -0.004 -0.036Total -0.3 1.3 2.0 0.004 -0.037

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continued

Relative Poverty-Change in Gender Composition in Poor Household

NoED

LowED

MedED

HighED

Urban

Empee FH

S-Emp oth

Empyer Rur Pak

Men -0.11 -0.99 0.03 0 -0.08 0 0.08 -0.03 -0.07 0 0.02 -0.03

Women 0.11 0.99 -0.03 0 0.08 0 -0.08 0.03 0.07 0 -0.02 0.03

Capability Poverty Indicators    

M-IMR 0.7 -0.2 -0.06 -0.23 -0.08 0.07 -0.11 0.07 0.02 -0.1 0.04 0.01

F-IMR 0.7 -0.2 -0.06 -0.24 -0.05 0.07 -0.11 0.07 0.02 -0.1 0.05 0.03

M-LR -0.6 0.24 0.04 0.02 -0.2 -0.92 0.49 -0.3 -0.04 0.15 -0.37 -0.29

F-LR -0.92 0.95 0.17 0.08 -0.33 -3.33 1.57 -1.12 -0.1 0.59 -1.69 -1.11

Leisure—Relative Time Poverty

Men -0.7 6.4 1.7 3.8 1.87 -1.7 4.8 -1.3 -1.4 1.7 -1.49 0.15

Women -1.3 6.3 1.2 4.3 1.74 -1.9 4.8 -1.5 -1.5 0.6 -1.68 -0.09

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Conclusion• Revenue Neutral Trade Liberalization • benefit more to women by increasing

•Market Employment of unskilled worker •Wage income of women more than menHarmful as •Division of labor remains unequal and

Women becomes more time poorTrade Liberalization, Poverty and Welfare

•Head Count Ratio Reduces at the national level increases in rural, decreases in urban area

– Trade Liberalization and Welfare •Welfare improves when measured at

consumption level of market goods•Deteriorate- with reduction in consumption

of market and non market goods

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ConclusionTL and Poor

– Increase Work Load on women relative to Men– Deteriorate capabilities—FLR > MLR– Increase income poverty among women relative to men– Increase time poverty by reducing leisure time– Welfare improves - Consumption of market goods only– Welfare deteriorate - consumption of both market and

non-market goods

TL and Rich

– TL is Gender Neutral for Rich Households – Remittances neutralize negative effects of trade

liberalization– Welfare Improves with consumption of market goods– Welfare does not change with total consumption (market and non market goods)—work load increases and leisure reduces)

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Policy Implications

• Complementary Policies

• Reduce Tax on basic need

• Transfer payments

• Poverty Targeted Program

• Public Investment in Social Sector

• Migration – Remittance

• Household Responsibility must be share by men

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