63516 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise JULY 2011 • Number 62 JUNE 2011 • Number 60 JUN 010 • Numbe 18 Gender-Informing Aid for Prudential Regulation Initial How Complementary Are Trade: Entry Points andand Lessons Learned Policy? Monetaryfrom the World Bank Elisa Gamberoni and José Guilherme Reis Otaviano Canuto The effects of policy interventions on women are of increasing concern to on individually to fields, and trade is no Could either monetary policy or financial prudential regulation be reliedpolicy makers in allmitigate asset price cycles or exception. If both ways are recent World Bank projects and studies that “gender inform� trade-related interventions, and their effects? This note reviewseffective, monetary policy and prudential regulation could then be considered “substitutes,� in it uses that the individual use of either instrument leads to a reduction in the volatility points corresponding projects, the sensethe Bank’s experience to promote gender-equal opportunities by highlighting entryof both at which tradetargets. This studies, and argues can effectively address gender issues. note, however, policiesin favor of complementarity—rather than substitution—in the use of monetary and macroprudential policies: the combined (articulate) use of both monetary and macroprudential policies and rules tends to be more effective than a standalone implementation of either. There are essentially three reasons why implementing Third, on average, women devote a larger portion of their gender-informed trade interventions and policies is key to incomes than do men to child health care and education, thus , Monetary Policy Asset Prices, and Finan- “Great Moderation� in developed economies, with relatively achieving broader development objectives. First, discrimina- enhancing the human capital accumulation of countries in cial Stability low inflation rates and small output fluctuations from the mid- tion against female entrepreneurs and farmers may impede which women have higher levels of economic influence. (See, 1980s onward, seems to vindicate this path. their access to information, finance, for markets, which, to Asset price cycles had been a concern andmany years prior in for example, Thomas [1990] and Qian [2008].) Thus, a trade As is now known, this world of presumed stable monetary turn, can undermine the actual and potential as a separate is- the recent global financial crisis, but were seen productivity of project that adversely affects female income levels can have its and financial conditions was severely shaken by the recent glob- women-led not a monetary policy concern. Even when the sue that was economic activities, thereby slowing overall pro- development potential reduced, requiring that policies be de- al financial crisis. With the benefit of hindsight, it is easy to ductivity growth. frequent appearance of asset price bubbles started to be ac- signed and implemented to compensate for the negative ef- draw lessons. Asset price booms and busts were acknowledged Second, the belief was—“the inadequately tailored to knowledged, interventions that are Greenspan-Bernanke ap- fects. Conversely, an intervention that positively affects the to be both pervasive and harmful: real estate and stock market handling all circumstances or toand prick the particular re- proach�1—that attempts to detect meeting them at an early incomes of women may have multiplier effects in terms of its booms contributed to excess U.S. household debt and to fragile quirements of women in and potentially harmful. If neces- stage would be impossiblespecific places can also aggravate in- overall development effects. asset liability structures, the interconnectedness of financial equalities and reverse previously achieved gains safer, using sary, mopping up after the bubble burst would be for women firms’ balance sheets, and the danger of too-big-to-fail institu- interest rate cuts to help economic recovery.2 a subset of firms because such interventions could favor only tions. The rapid global transmission Gender: Export Competitiveness andof an asset price bust or workers ininflation is apopulation.and sufficient condition Low, stable the target necessary For example, evidence pushed the world economy to and Workers Female Entrepreneurs the edge of quasi-collapse (Ca- suggests that as industries upgrade, the production of acondi- for stable growth with moderate unemployment. This previ- nuto 2009). ously female intensive sector becomes less female intensive. Interventions aimed at enhancing trade competitiveness and tion could be pursued, among other ways, through an inflation But was it lax monetary policy that led to the creation of Thus, interventions that will give rise to economic adjust- encouraging greater diversification are priority areas for trade targeting framework, using interest rates and clear communica- these bubbles and then to financial instability? Some, such as ments in female-dominated sectors should be complemented support, as identified by the World Bank’s new trade strategy. tion rules to achieve a predefined inflation objective, as the sin- Svensson (2010), say no. For them, the financial crisis was by efforts to ensure that the adjustment process does not fall Taking into account gender-based discrimination and existing gle focus for monetary authorities. Stable inflation would also caused by factors other than monetary policy; monetary policy entirely on those women. inequalities in access to resources can help to increase the per- result in low-risk premia, which combined with competition in and financial stability policy are distinct–it was the latter that financial markets would help achieve financial stability. The failed.3 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise formance of the export sector. Therefore, including women marketing processes (Diop-Diagne, Balcet, and Dicko 2009). in trade-related interventions implies that a larger set of the Therefore, considering the role of women when designing population will have opportunities to upgrade their skills, Aid for Trade interventions can help better identify the con- and a larger fraction of producers will have the necessary tools straints faced by exporters, thereby increasing the overall ef- to exploit the available opportunities offered by the greater fect of the intervention and ensuring that female producers access to markets that follows from greater openness to trade. benefit from any additional income. One example of the potential effects of gender-informed The concentration of female workers in a particular sector trade competitiveness operations is the Ugandan cotton might also imply that certain issues regarding the sector’s un- market. Cotton is a large, significant export crop for Uganda, derperformance are gender specific (for example, fewer women and the sector is characterized by smallholder production than men are being formally trained). A precise example of this (Baffes 2009a). Interviews with almost 500 cotton growers implication can be found in the garment sector of the Lao Peo- in four cotton-growing regions of Uganda revealed a large ple’s Democratic Republic. Traditionally, Lao PDR’s garment productivity gap between male and female cotton growers sector has been a highly female labor–intensive sector and has (Baffes 2009b; Baffes et al. 2010). Zhang (forthcoming) been a major source of manufacturing exports for the country. demonstrates that, even when accounting for the fact that The sector is also subject to a high employment turnover, women producers work lower-quality land, have weaker which, in turn, affects its productivity (Record 2010). In this land ownership rights, and have less autonomy over land as- context, recent activities funded by the World Bank’s Gender sets, women householder producers have average yields that Action Plan will offer gender-sensitive assessments of current are one-third below those of their male counterparts. Rais- working practices, which, in turn, seek to enhance the produc- ing the competitiveness of the sector, therefore, calls for tivity of the sector. gender-specific interventions that go beyond simply improv- The “Southern Sudan Women’s Association� is another ing access to land. Zhang’s analysis revealed, for example, example of a project that can help the competitiveness agenda that female households have more limited access to informa- by ensuring that all female-led firms in the region have the tion when compared to male producers. tools with which to exploit the economic opportunities avail- This inequality has led to the decision to provide agricul- able as market opportunities expand. Though the World ture extension training for women through a local “social net- Bank provided technical support with the registration pro- working intervention.� Female households participated in in- cess for the association, female entrepreneurs in the region formation sessions, and each woman was paired with a person spontaneously created the group, and it has continuously in her village area with whom she was encouraged to develop grown. Furthermore, the association recently joined forces an agricultural link. An impact evaluation conducted by Vasi- with the East African Women’s Entrepreneurs Exchange laky (2010) revealed that the social networking intervention Network, which helps its members to expand their sales be- had a significant effect on yields for low-yielding farmers, con- yond the domestic market. The voluntary decision to form siderably increasing female households’ productivity. Future the association suggests that women are looking for better research will look at the channels through which the net- ways to acquire information and to share experiences so they work’s intervention affects outcomes and at the network’s in- can grow their businesses. fluence on agricultural learning. So far, this note has largely discussed how gender inequal- Value chain analyses are also important tools for analyzing ity can affect the competitiveness of the export sector. How- competitiveness bottlenecks in specific sectors and for study- ever, trade projects should also consider interventions that ing gender differences. Such tools have been used for World mitigate the burdens on women—namely, burdens that arise Bank projects, such as the Bank’s analysis of agricultural com- from women’s adjustments to more efficient production petitiveness in Mali. The project focuses on targeted interven- methods. Although certain sectors appear to employ women tions along the value chains of both traditional and nontradi- more intensively than do other sectors, upgrading processes tional agricultural products for which Mali has a comparative may drive female workers out, because they may be replaced advantage. The project has already yielded significant results, by more highly skilled men (see, for example, the analysis of including a 72 percent increase in mango exports and a 71 Tejani and Milberg 2010). Key reasons for this outcome in- percent increase in shallot and onion exports (World Bank clude (a) differences in the content of men’s and women’s 2011). In the case of mango exports, the analysis of the value education (Berik forthcoming); (b) discrimination and gen- chain revealed that women are largely involved in picking, der segregation in certain jobs (Tejani and Milberg 2010); sorting, and collecting mangoes; transforming mangoes into and, finally, (c) tight female labor markets that can lead to up- juice, dried fruits, and marmalade; and selling fresh mangoes ward pressures on female wages and to the emergence of lower to local and regional markets. In the case of onions, women wage sites, which, in turn, “lead firms to invest in training for are largely involved in the production, transformation, and male workers, consistent with the view that men deserve 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise more secure employment and are less likely to leave paid work ers, including (a) a lack of transparency in the application of to fulfill domestic responsibilities� (Seguino and Growth rules and (b) bad infrastructure. Interventions that target 2006, 8). These factors point to the need for interventions these informal traders have the advantages of improving the aimed at improving the skill levels of women who are already quality of life for women and of increasing women’s incomes employed in such sectors to avoid their replacement in the by allowing for an expansion and, ultimately, for formalization workplace. of their activities. However, the quality of customs-border ar- rangements confronting small traders has attracted much less Trade Facilitation and Gender: attention than has customs-border management for larger and The Importance of Informal Cross-Border formal traders (Brenton et al. 2011). Traders Aid for Trade interventions could help these traders increase the volume of their activities. Given that the large Reducing trade costs is an important dimension of increasing majority of informal traders are women, trade facilitation in- competitiveness. Such costs weigh particularly heavily on in- terventions should target women specifically. If these inter- formal traders. The economic contribution of informal cross- ventions are applied generally, then support for informal border trade in low-income countries is often large. For ex- trade may have disproportional benefits for women (and ample, Lesser and Moisé-Leeman (2009) report that Uganda’s their children). For example, Maimbo, Saranga, and Strychacz informal exports to its five neighboring countries in 2006 ac- (2010) discuss the importance of cross-border mobile bank- counted for 86 percent of the Uganda’s official export flows to ing to increase the volume of informal cross-border trade in those countries, whereas, in Benin, informal cross-border Southern Africa, which is already significant at an estimated trade for certain commodities accounts for as much as 10 $17.6 billion per year—with most traders, again, being times the official export flows. women. Informal cross-border trade constitutes a major source of income for small producers in developing countries and con- Looking Forward tributes to linking producers across regional markets. In the case of the borders between Burundi, the Democratic Repub- These examples have illustrated that incorporating gender dif- lic of Congo, and Uganda, food commodities represent the ferences into Aid for Trade interventions can have high pay- products most frequently traded. Facilitating such trade offs. Although the earlier discussion has focused mostly on in- could help to reduce food prices in the region and could in- creasing the benefits of trade opportunities for women, other crease food security1 (see Brenton et al. 2011). dimensions are also important. For example, the evidence sug- Evidence suggests that women represent a large propor- gests that women are subject to more volatile employment sta- tion of informal cross-border traders in Africa. The Economic tuses following trade liberalization and are more vulnerable to Commission for Africa (2010) reports, for example, that external demand shocks, such as those associated with the re- women constitute the majority of informal traders, represent- cent global financial crisis. For example, Levinsohn (1999), in ing between 70 percent and 80 percent of the total in South- analyzing the effects of trade liberalization in Chile, finds that ern and West Africa. Similarly, the Overseas Development gross job reallocation rates are often more than twice as high Institute (2010) reports that women constitute 70 percent of for women than for men. In this context, Aid for Trade can be informal traders in the Southern African Development Com- used to ensure that women do not disproportionately bear any munity. In Benin, 80 percent of those involved in informal adjustment costs associated with trade liberalization. To iden- trade are women, a figure that rises to 95 percent for individu- tify such situations, researchers need to develop better gender- als involved in the informal marketing of unprocessed goods. disaggregated data, which are not always up to date—or even According to Brenton et al. (2011), 85 percent of traders available—for some countries. Investing in the collection of along the Great Lakes border in Africa are women. such data will help to lay the basis for a more comprehensive Because of the importance of informal, cross-border trade analysis of trade and gender interventions. as a potential source of growth, it is, therefore, crucial to ac- Discussions about the role of gender in the Bank’s trade knowledge the dynamics and constraints faced by small trad- portfolio have identified a need for operational guidance to ers in the design of Aid for Trade interventions. Brenton et al. help task managers identify and assess the gender dimensions (2011) find that small-scale women entrepreneurs are subject of trade lending and of analytical and advisory activities. To ad- to requests for bribes, to physical abuse, and to harassment at dress this need, the World Bank’s International Trade Depart- country borders. Even in the presence of this risky environ- ment and the Poverty Reduction and Economic Management ment, most women surveyed declared that they would still (PREM) Gender and Development Group are developing guid- like to expand their business. The authors discuss the reasons ance notes to support gendered analysis, diagnostics, technical behind the corruption and physical abuse faced by these trad- assistance, and lending operations by integrating gender di- 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise mensions into the development, implementation, and evalua- Baffes, John, Madhur Guatam, Kenneth L. Leonard, Laoura Maratou, and Sarah Ssewanyana. 2010. “The Gender Dimension of Cotton Produc- tion of trade activities. These guidance notes will focus on top- tivity in Uganda.� Gender Action Plan proposal, World Bank, Washing- ics that are of central importance in the World Bank Group’s ton, DC. new trade strategy, including export competitiveness, trade fa- Bardasi, Elena, and Elisa Gamberoni. Forthcoming. “Women Entrepreneurs cilitation and logistics, and trade policy (market access) and re- in Middle- and Low-Income Countries.� Policy Note, World Bank, Wash- ington, DC. gional integration. Berik, Gunseli. Forthcoming. “Gender Aspecs of Trade.� In Trade and Em- In designing gender-related interventions into the Aid for ployment: From Myths to Facts, ed. M. Jansen, R. Peters, and J. M. Salazar- Trade interventions, one can find it useful to look at the inter- Xirinachs. Geneva: International Labour Organization–European ventions that improve the performance of female entrepre- Commission. Brenton, Paul, Celestin Bashinge Bucekuderhwa, Caroline Hossein, Shiho neurs, even if the interventions do not specifically focus on Nagaki, and Jean Baptiste Ntagoma. 2011. “Risky Business: Poor Wom- trade.2 For example, the World Bank and the United Nations en Cross-Border Traders in the Great Lakes Region of Africa.� Africa Development Fund for Women are testing a pilot program Trade Policy Note 11, World Bank, Washington, DC. that provides a business-training program (structured around Diop-Diagne, Astou, Jean Claude Balcet, and Boureima Gnalibouly Dicko. 2009. “Analyse de la dimension de genre dans les filières prioritaires du personal development, business development, and manage- PCDA et du PAPAM.� Draft document. World Bank, Mali. ment and productivity improvement) with a technical assis- Economic Commission for Africa. 2010. “Gender Dimensions of Cross- tance component that provides for more specific support that Border Trade in the East African Community: Kenya/Uganda and Rwanda/Burundi Borders.� Gender and Trade Policy Brief 1, African is based on the characteristics of women’s businesses and Trade Policy Centre, Addis Ababa. their needs. The preliminary findings of the program’s impact Lesser, Caroline, and Evdokia Moisé-Leeman. 2009. “Informal Cross-Border evaluation suggest that training alone is not effective. Adding Trade and Trade Facilitation Reform in Sub-Saharan Africa.� Trade Poli- a technical assistance component to help women (a) increase cy Working Paper 86, Organisation for Economic Co-operation and De- velopment, Paris. their association with business peers and (b) use informal Levinsohn, James. 1999. “Employment Responses to International Liberal- credit sources led to a 17 percent increase in their sales. ization in Chile.� Journal of International Economics 47 (2): 321–44. Maimbo, Samuel, Tania Saranga, and Nicholas Strychacz. 2010. “Facilitating About the Authors Cross-Border Mobile Banking in Southern Africa.� Africa Trade Policy Note 1, World Bank, Washington, DC. Overseas Development Institute. 2010. “Tips and Tools for Aid for Trade, Elisa Gamberoni is an economist in the PREM Gender and Devel- Inclusive Growth, and Poverty Reduction.� Brief 3, Overseas Devlop- opment Group, and José Guilherme Reis is a lead economist in the ment Institute, Londo. http://www.odi.org.uk. PREM Trade Group. The views expressed in this article are solely Qian, Nancy. 2008. “Missing Women and the Price of Tea in China: The Ef- fect of Sex-Specific Earnings on Sex Imbalance.� Centre for Economic those of the authors and do not reflect those of the World Bank or its Policy Research Discussion Paper 5986, Centre for Economic Policy Re- Executive Directors. The authors are grateful to John Baffes, Elena search, London. Bardasi, Anna Kristina Faber, Thomas Farole, Ian Gillson, Ber- Record, Richard. 2010. “Fairer Trade: Mainstreaming Gender into Lao Trade nard Hoekman, Richard Newfarmer, and Yeyande Sangho for Activities.� Gender Action Plan proposal, World Bank, Washington, DC. Seguino, Stephanie, and Caren Growth. 2006. “Gender Equity and Global- their invaluable comments. ization: Macroeconomic Policy for Developing Countries.� University Library of Munich Working Paper 6540, University Library of Munich, Notes Germany. Tejani, S., and W. Milberg. 2010. “Global Defeminization? Industrial Up- grading, Occupational Segmentation and Manufacturing Employment 1. It is important to note that although informal trade is un- in Middle-Income Countries.� Schwartz Center for Economic Policy documented, many cross-border traders pay duties and taxes Analysis Working Paper, Schwartz Center for Economic Policy Analysis, (Maimbo, Saranga, and Strychacz 2010). New York. 2. See Bardasi and Gamberoni’s (forthcoming) policy note on Thomas, Duncan. 1990. “Intra-Household Resource Allocation: An Inferen- tial Approach.� Journal of Human Resources 25 (4): 635–64. entrepreneurship. Vasilaky, Kathryn. 2010. “Randomizing Social Networks in Rural Uganda: New Links Improve Outcomes.� http://www.econ.yale.edu/seminars/ References develop/tdw10/vasilaky-101025.pdf. World Bank. 2011. “Mali: Agricultural Competitiveness and Diversification Baffes John. 2009a. “The Cotton Sector of Uganda.� Africa Region Working Project.� News and Broadcasts. http://go.worldbank.org/Y7JLHLFP70. Paper 123, World Bank, Washington, DC. Zhang, Xiaojie. Forthcoming. “Gender Dimension of Cotton Productivity in ———. 2009b. “The ‘Full Potential’ of Uganda’s Cotton Industry.� Development Uganda.� Honors Thesis, Department of Agricultural and Resource Eco- Policy Review 27 (1): 67–85. nomics, University of Maryland, College Park. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. It is produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at http://www.worldbank.org/economicpremise. 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise