Economic freedom can help improve allocation of human capital for men and women

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Economic freedom can help improve allocation of human capital for men and women

A recent study published by the Fraser Institute asks whether economically free societies are more likely to be sexist by exploring the empirical relationship between economic freedom and gender norms.

Gender norms refer to society’s shared expectations about the roles men and women should play, the rules they should follow, and the behaviours they should exhibit (or avoid).

These cultural forces may reinforce labour market differences between men and women. The work of Nobel Laureate Claudia Goldin (2021) shows that primary caregivers tend to suffer labour market disadvantages. Primary caregivers often seek employment opportunities with flexible hours and fewer travel commitments and take longer breaks from the labour market after each child. This contributes to lower earnings over the course of their careers. In fact, the gender wage gap is almost entirely explained by differences in the educational and employment choices of men and women (Blau and Kahn 2017; Goldin 1990; Becker 1985). If gender norms channel more women than men into caregiving roles, then gender gaps in the labour market will persist.

How might economic freedom influence gender norms?

Some scholars (Folbre 2009, Nussbaum 2000, and Cudd and Holmstrom 2011) argue that free markets reward participants with “masculine” traits, reinforcing patriarchal norms. This may encourage some individuals to work in the home instead of the labour force. And they will not experience the same rewards, despite their unpaid contributions enabling others to fully participate in the market. Further, Godsee (2018) argues that women were treated more equally under socialism since the state directly promoted gender equality in the labour market and education.

Scholars on the other side argue that market participation cultivates virtuous behaviour such as honesty, prudence and tolerance (Montesquieu 1748 and McCloskey 2006, 2010, and 2016). Commerce exposes us to other cultures, which promotes less discrimination (Becker 1971) and more acceptance of those who challenge dominant norms (Berggren and Nilsson 2013).

I tested these competing theories using two main sources of data: the Fraser Institute’s Economic Freedom of the World Report and a measure of gender norms constructed using three questions from the World Values Survey. These questions ask respondents across 95 countries whether they agree or disagree with the following claims:

  1. When jobs are scarce, men have more right to a job than women.
  2. Men make better political leaders than women do.
  3. University is more important for a man than a woman.

These responses were used to create a Gender Social Norms Index (GSNI) score between 0 and 1. Countries scoring closer to 1 exhibit less of a male bias in employment, leadership and education opportunities, while countries scoring closer to 0 more strongly prioritize men over women in these roles. I then use regression analysis to explore the empirical relationship between economic freedom and gender norms as measured by the GSNI.

The results suggest that greater economic freedom is associated with gender norms that treat men and women more equally. This relationship holds after controlling for income, political institutions, civil liberties and religious beliefs. It also holds when looking at gender norms and past economic freedom. While this study does not establish causality, it challenges the claim that women are treated more equally under socialism.

Why does this matter?

It’s not just a matter of fairness. If our society exhibits a default male bias when it comes to employment, political leadership and educational opportunities, and this bias does not reflect the underlying talents, skills and preferences of those participating in our economy, then we’re misallocating our human capital. Women who would excel in traditionally male roles may never choose to exercise those talents. Men who would be nurturing caregivers may feel social pressure to leave the child-care responsibilities to their partners. In a world without this bias, people would be better able to allocate their talents to their most highly valued uses and a greater degree of human flourishing would likely result. In this way, gender biases hurt everyone.

An important policy implication can also be drawn from these results. There has been an increase in global efforts to improve women’s performance in the labour market using policy mandates such as gender quotas and family-friendly labour laws. This study suggests that perhaps it’s time to explore an alternative path—economic freedom.