Gender Parity and Economic Freedom Are Closely Linked

Equal rights for women isn't just a feminist concern; it's an economic one.

The new Economic Freedom of the World Index ranks 159 countries based on five measures of economic freedom: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation.

Published by the Fraser Institute, the data show a strong correlation between economic freedom and human progress. People who live in countries in the top quartile of economic freedom not only have a greater GDP per capita than those in the bottom quartile, but also live longer, enjoy higher levels of political and civil liberties, and tend to be happier about their lives.

Previous reports assumed that women and men faced the same barriers. Gender Parity Matters

For the first time, the Index changed its methodology to include a Gender Disparity Index (GDI) which reflects legal and regulatory barriers to the economic activities of women. Previous reports assumed that women and men faced the same barriers. But that is not the case for many countries, like Saudi Arabia, where women still need a man’s permission to get a job or to open a bank account.

The GDI uses data from the World Bank’s Women, Business, and the Law and 50 Years of Women’s Rights, which track changes in gender equality over time. A country’s score on the GDI can range from 0 to 1. This means that a country will receive a score closer to 0 if women there do not have the same economic rights as men. On the other hand, a country with a score closer to 1 will more likely treat men and women equally under the law, and women do not face additional barriers to economic activity.

For the most recent year for which data are available, 2015, the GDI barely affected the overall scores for 122 out of 159 countries. But for a small set of nations, this new methodology meant a significant decline both in their scores and rankings. Some of the countries with the biggest changes were Saudi Arabia, United Arab Emirates, Kuwait, Jordan, Bahrain, Qatar, Oman, Iran, Egypt, Morocco, and Syria.

Contributor Rosemary Fike points out that the GDI had the largest effect on the Middle East and North Africa nations. Many such countries would be relatively economically free without the restrictions on women. For example, the United Arab Emirates and Jordan, which would have been among the top 20 nations in the EFW index if the gender adjustment had not been included, saw a decline to 37th and 39th respectively.

Equality for Women

Another of the most important findings is that the lowest scores in the GDI have increased significantly since 1970 when the lowest 15 scores ranged from 0.00 to 0.44. In 2015, they ranged from 0.41 to 0.65. Countries have begun to remove their barriers to the economic activities of women over time at the same time that women are becoming more equal to men in their choices and careers.

The graph below shows the gender disparity average scores by economic freedom quartiles. Countries in the bottom quartile have a lower score in the GDI, an average of 0.76. As one moves to higher quartiles, the GDI scores increase, and the most economically free quartile had an average GDI score of 0.95. 

Source: Economic Freedom of the World: 2017 Annual Report; Rosemarie Fike.

Gender equality under the law improves as countries become more economically free. Countries that still restrict women’s economic rights will pay higher economic costs. Treating women and men equally before the law brings more economic freedom and increases society’s potential growth.

Reprinted from Economics21

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