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Where are Women in Macroeconomic Models?

Özlem Onaran

In a recent article in the Financial Times, Gemma Tetlow asked “Where are all the female economists?” We ask a related question “Where are women in macroeconomic models?” in our new project The effects of income, gender and wealth inequality on macroeconomic performance funded by Rebuilding Macroeconomics (Onaran, Oyvat, Fotopoulou, 2018).

The recent gender pay gap reports published by large companies in the UK as well as data by Office of National Statistics show that men earn, on average, almost 20% more than women, despite decades of improvements in legal rights and education. One explanation is the concentration of women in occupations with lower hourly pay and/or part-time work. Another is the so-called “glass ceilings” the further we progress up organisational hierarchies. These relate to fundamental differences in gender roles in our societies. For example, women tend to spend more time taking care of the children or the elderly within the household than men. Also, care services in the market are undersupplied or unaffordable. These features have gendered economic outcomes.

There is much research in feminist and labour economics about the causes of gender gaps in pay, wealth and employment. Yet gender is missing in macroeconomic models as a focus of analysis. We therefore cannot ask fundamental questions such as what is the relation between gender inequality on productivity, employment, investment or the public sector budget?

“The aim of our project is to correct this fundamental omission. We will investigate the effects of gender, income and wealth inequalities on macroeconomic performance”

The aim of our project is to correct this fundamental omission. We will investigate the effects of gender, income and wealth inequalities on macroeconomic performance. Notice that we talk about ‘inequalities’ in plural. Persistent gender inequality in pay and employment is likely to interact with other dimensions of inequality. In particular, the fall in the labour share of income and the increase in the concentration of wealth over the last four decades is likely to interact with gender income inequality.

There is a strong case that excessive inequality deters growth and stability and even contributed to financial imbalances leading to the Global Financial crisis (see, for example, Kumhof et al., 2015; Rajan, 2010; Fitoussi and Saraceno, 2010; Goda and Lysandrou, 2014; Goda et al,. 2016). Recent research at the OECD and the IMF argue that inequality may also impede growth due to supply factors. This includes barriers to education and political risk, building on ideas from the new institutionalist political economy school. Post-Keynesian economists show the negative impact of falling wage share on growth looking at the demand side of the economy.

However, these strands of research utilise genderless macroeconomic models. They exclude the fundamental macroeconomic dimension of inequality along gender lines and how this interacts with other forms of inequality. Even gender studies have not come to terms with macroeconomic modelling. There are, as always, some notable exceptions and research by the Women’s Budget Group-UK, Seguino, Braunstein, Ilkkaracan and colleagues deserves and honourable mention.

In our project we aim to develop an interdisciplinary and gendered macroeconomic analysis. We will bring together insights from structuralist, Post-Keynesian and feminist economics together with gender studies and sociology. This will integrate realistic features of gendered behaviour and social norms, such as reciprocity, caring and non-selfish motives into macroeconomic modelling. These have not been fully integrated in macroeconomics before. This will allow us to examine what effect might a change in the gender pay gap, public spending on child care, education or health and social care have on the employment of men and women and their incomes.

On the demand side, we will consider a dual role of wages as not only as a factor cost item, but also as a source of income and demand. The differences in the consumption out of female versus male income, or the wealth of different social groups may lead to real differences in the economy. For example, as women earn less than men, we expect women to consume a higher share of their income compared to men.

Closing the gender pay gap or higher female employment is expected to lead to higher consumption. There is evidence that more income in the hands of women increases household spending on children’s education and health and thereby affects long-run productivity.

On the supply side, we will analyse the impact of female and male wages and public and private spending on productivity. A crucial supply side channel we aim to explore is whether closing gender pay gaps increases labour productivity and profitability. This could be through the consequences of demand effects as well as greater spending on health and education at the household level in the long-run.

We will use the model to analyse the effects of changes in inequalities, different types of public spending on social and physical infrastructure and redistributive tax policies. We will focus on the effects on productivity, growth, employment of men and women, public and private debt, and private investment. We aim to examine if and how a policy mix may affect different social groups. What would the effect of closing gender pay gaps via upward convergence in female and male wages have on employment of women and men? What difference might public spending on social versus physical infrastructure have on women and men?

The results could provide a useful framework for policy makers to assess the consequences of labour and fiscal policies on macroeconomic performance by recognising gender. This may help with tackling multiple dimensions of inequalities and achieve both a stable macroeconomic environment and social cohesion. This requires gendering macroeconomic analysis in policy making. We also hope that the recognition that there is more to macroeconomics than resting solely on an economic man may indirectly address some of the questions raised by Gemma Tetlow in the Financial Times.


Antonopoulos, R., K. Kim, T. Masterson and A. Zacharias (2010) ‘Investing in Care: A Strategy for Effective and Equitable Job Creation.’ Working Paper No.610. Levy Economics Institute.

Braunstein, E., I. Stavaren and D. Tavani (2011) ‘Embedding Care and Unpaid Work in Macroeconomic Modelling: A Structuralist Approach.’ Feminist Economics 17(4): 5–31.

De Henau, J., Himmelweit, S. Lapniewska, Z. and Perrons, D., (2016) Investing in the Care Economy: A gender analysis of employment stimulus in seven OECD countries. Report by the UK Women’s Budget Group for the International Trade Union Confederation, Brussels.

Fitoussi, J.-P. and F. Saraceno (2010) ‘Inequality and the Macroeconomic Performance.‘ OFCE Working Paper no 2010-13. Paris: Science Po.

Goda, T. and P. Lysandrou (2014) ‘The Contribution of Wealth Concentration to the Subprime Crisis: A Quantitative Estimation’, Cambridge Journal of Economics 38(2): 301–27.

Goda, T., Onaran, Ö., Stockhammer, E. 2016 ‘Income inequality and wealth concentration in the recent crisis’, Development and Change, 48(1): 3-27

Ilkkaracan, I., Kim, K. and Kaya, T. (2015). The Impact of Public Investment in Social Care Services on Employment, Gender Equality, and Poverty: The Turkish Case. Research Project Report, in partnership with ILO and UNDP Turkey, and the UNDP and UN Women Regional Offices for Europe and Central Asia.

Kumhof, M., R. Ranciére and P. Winant (2015) ‘Inequality, Leverage, and Crises’, American Economic Review 105(3): 1217–45.

Rajan, R.G. (2010) Fault Lines. How Hidden Fractures Still Threaten the World Economy. Princeton: Princeton University Press.

Seguino, S. 2012. “Macroeconomics, Human Development, and Distribution.” Journal of Human Development and Capabilities: A Multi-Disciplinary Journal for People-Centered Development 13(1): 59–81.

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