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Neha Sumesh is a second-year student at National Law University Delhi.
Economics within the Social Structure of Gender: Relationship between Gender Stereotypes and Economic Policy
‘Gender’ is a social and cultural construction that one is categorised into based on certain traits, roles, expectations, and behaviours that are usually associated with the particular gender. The result of such categorisation based on characteristics is that it creates a bias in the general social functioning. Consequently, gender forms a hierarchical structure that places men in the most privileged position while women are in a subordinate position, and the third gender is almost entirely eliminated from consideration. The inequality of genders continues to create an uneven playing field in many areas. Gender inequality is “not one homogenous problem, but a collection of disparate and interlinked problems”.
In institutional economics, economic interactions are not solely rational as in the neoclassical approach because real-world markets are gender-embedded with individual player identities hence, individual agency varies depending on socially defined constraints and conventions. Social identity heavily influences personal preferences and choices. Persisting gender relations and hierarchies result in “asymmetrical information”, either through disproportionate access or disproportionate processing and interpretation of information depending on the identity of the consumer, which in turn, creates a situation of “bounded rationality”, wherein their choices and preferences are limited by the available information and hence, not made entirely freely.
This is where consumer behaviour based on gender patterns comes in while shaping economic policies. For example, women are far more likely to spend their income on the subsistence requirements of their family while men tend to spend their income on personal needs, because women, often, do not have the luxury or agency to give priority to their individual needs. One can argue that factors such as income levels are far more important in influencing consumer choice. However, the argument that these income levels are often determined by gender patterns itself makes a compelling counter-argument. Institutional economics calls this influence of social relations and structures in shaping consumer demand the “theory of lexicographic preferences”.
The gendered patterns in labour markets are also reflective of domestic structures within households and their internal division of labour. This is evident in how unpaid productive, reproductive, and service work in the economy is dominated by women. Women’s chores in a typical rural household largely involve work that is tedious but unpaid hence, oftentimes goes unnoticed and unappreciated. According to a study done in Iran, 80% of rural women do some kind of work but it is rarely measured in government surveys as they fall under the underappreciated umbrella of seasonal, part-time or unpaid employment. Similarly, intra-household resource allocation most often reflects the inequality in resource distribution in the world outside
This reinforcing relationship between economic and gender structures makes economic policies and gender trends mutually affecting. Economists and law-makers have recognised the influence that gender has on the reach, impact, and utilisation of economic policies and it, thus, becomes imperative for resource allocation patterns and gender structures to be factored in before drafting sound economic policies. Even policies that seem neutral and unbiased on the face of it can sometimes have a disproportionate impact if it tends to focus on specific conditions that might indirectly favour a particular gender over the other.
The loan policy in the Solomon Islands can illustrate this scenario of implicit gender discrimination well. The criteria for applying for a fishing loan are the ownership of a motor and a boat. It so happens that fishing is primarily a women’s activity in the Solomon Islands; however, it is also true that most women do not have the requisite resources to own a motor or a boat as they tend to be from relatively lower economic strata owing to lesser or no control over money within the household to own one for themselves. Thus, a loan requirement that was meant to benefit women in the fishing business ends up playing against them, creating a disadvantageous business environment by making it easier or more likely for richer and male applicants to avail its benefits.
The disadvantaged position that women face in the economic structure is the result of centuries of patriarchal oppression. Structurally entrenched stereotypes have an effect on markets when people with deliberate or unintentional biases are given the authority to make decisions on the access and control of resources. The compounding effect of the prolonged historical oppression coupled with limiting economic policies results in a fatal, recurring, and perhaps, an inescapable cycle of gender inequality. The histories, needs, interests, priorities, and values of different social groups should be reflected in defining what is just, impartial, fair, or, in a sense, truly equal. This normative idea of ‘equity’ is significant in the study of economic theories, structures, trends, and policies, especially in an institutional economic framework.
Case Study: Bank Loan Policies
In recent years, there has been a governmental push for business ventures and, in specific, women entrepreneurship. Bank loans are a significant initiating force for new businesses, especially for the ones inexperienced and unaccustomed to the business landscape. This includes much of the female population in developing countries where women’s involvement in markets is relatively new. The delayed inclusion of women in the business landscape, or even in the accounted employment sector is a result of centuries of oppression faced by women. Add to this, the prevailing gender stereotypes that obscure truly rational decision-making, and we find women to be in a particularly disadvantaged position.
Women’s access to credit for the growth or initiation of businesses continues to be stymied due to policy hurdles and biases. This pitiable state of the formal credit sector for women borrowers, especially in Asia and the Pacific, is a result of several reasons. Firstly, originally, banks were not set up with the intention of small-scale credit practices. This reluctance towards small-scale lending is disproportionately felt by women who have limited sources of credit. Secondly, the lack of a network of credit information and debtor history (mostly in rural areas) leaves creditors with limited information in determining the creditworthiness of new and potential debtors. Consequently, risk assessment is judged based on individual perception of the creditor rather than hard data, unfortunately placing women at a disadvantage since they have to bypass the gender biases of their potential creditors before even being considered for the credit.
So, not only do women find it hard to access credit, making it a credit system problem, but they also find it harder than men to do so, making it a gender concern. Women borrowers are treated worse than their male counterparts, are dissuaded from male-dominated businesses and are offered harsher terms. A study of 14,108 financing institutions in 34 countries showed that male entrepreneurs were 5% more likely to gain access to credit than their female counterparts who face greater rejection or dissuasion. In the cases where women’s loans were approved, it was either after providing greater collateral, through a guarantor, or with more stringent terms and higher interest rates. If men and women with virtually the same business skills, risk levels, and financial capabilities are treated differently only because of their gender, then there is an inherent prejudice operating against objective risk assessment. Experiments have demonstrated how traits such as “successful”, “competitive”, “smart”, and “strategic”, which are generally considered favourable for business success are more commonly associated with men than women. This “stereotype bias” forces them to believe men to be better credit risks for business ventures, in spite of there being no data supporting it.
The requirement for more valuable collateral provides a double disadvantage for women who usually don’t own sufficient assets to provide as collateral owing to the structural discrimination in inheritance and personal laws. The requirement for guarantors, yet again, reinforces the dependence of women when their entrepreneurship and business ventures are supposed to be opportunities to achieve financial independence and security. The presumption of credit-unworthiness also attacks women’s morale to start and expand businesses. The interest rate disparity and stringent terms further dissuade women from even applying in the first place and push them to informal lenders which have their own set of challenges such as the risk of undue influence, creation of disadvantageous relations, and the dangers of being outside the legal framework.
In some cases, the banks’ discretion in not granting loans to women or granting them only under stricter conditions is based on other gendered policies that impact lending decisions and risk calculations in spite of being enacted for women’s benefit. For example, maternity leave policies reinforce stereotypical presumptions of women being worse credit risks as the lesser pay leaves and long paid absence periods leave them with lower financial and job security. On the other hand, paternal leaves being shorter in period strengthen the stereotype that women are meant to be primary caregivers while allowing men to be seen as less risky debtors. In other words, women end up facing discrimination for the very reason that they are women, while data would show that women being blamed for their greater credit risks is an unconvincing argument based on mutually reinforcing stereotypes and policies.
The Vicious Cycle: What’s the Solution?
It has been known and shown that women’s empowerment and economic development are closely interrelated. Empowering women to include them in the formal employment sector not only increases net income and productivity but also brings a shift in the power structure that can be beneficial to overall economic growth. Simultaneously, the overall development of the country is also correlated with improved living conditions and better economic status for all people, especially socially disadvantaged groups such as women whose greater financial independence would lead to greater individual autonomy and social authority. In spite of data trends demonstrating this correlation, policies tend to look at one as the guaranteed source of causation for the other, or vice versa.
Hence, economic policies and gender-based solutions tend to focus on developing only one of them, hoping that development in the other would follow on its own. A consistent and efficient force is necessary for both gender and economic policy for any substantial transformation to occur in the hierarchical gender structure. This presumption that a one-time push towards women-friendly economic policy will be enough to spark off a virtuous circle of mutually reinforcing benefits for women, as well as the economy, gets the whole process wrong. Sound economic policies that evaluate the disproportionate impact and understand gender constraints are necessary.
Good economic policy alone is insufficient in bringing significant progress in all dimensions of women's empowerment because the human factor of gender perception persists to women’s disadvantage. To eliminate this human factor, we must recognise the common denominator in both the issues of women empowerment and economic development – gender bias. If women and their contribution to the labour and economy continue to be unrecognised or insufficiently catered to in our labour and financial markets, there is a deeper problematic mentality of gender bias that has to be overcome first. As long as financial security and independence remain inaccessible to women, they will continue to be forced to live a life of limited freedom and choice. Therefore, the issue at the base which has to be tackled is the intrinsic prejudice that plagues the objective functioning of the economic structure resulting in a system skewed in favour of the patriarchy by sub-par policy and discriminatory treatment.
Addressing the symptoms of gender inequality instead of the disease of patriarchy results in economic policies that are neither effective nor efficient, only resulting in a transient sense of social progress and an unfortunate spiral-down into a vicious cycle of detrimental policies and stereotypical patterns in the long run. The key here is constant and steady transformation at the grass-root level with significant and simultaneous effort in favour of both empowerment of all genders and dynamic development of the economy so that both dreams can be achieved in their true and permanent sense.