Economic liberalization, gender wage inequality and welfare – a theoretical analysis

The paper develops a 3-sector general equilibrium model appropriate for economies with female labour oriented export sector to examine the effects of economic liberalization policies on gender based wage inequality. It is assumed that there exist disparities in efficiencies between male and female labour due to skewed access to education and health, and differences in their spending patterns leading to differential effects of respective wages on their nutrition. The results indicate that tariff cut may reduce gender wage inequality, but may have detrimental effects on welfare; while foreign capital inflow may accentuate the inequality, despite improving the welfare of the economy. However, government policies to increase the provision of education and health have favourable effects on gender wage inequality but may be welfare deteriorating. Thus, the paper provides a theoretical explanation to empirical evidences of diverse effects of liberalization on gender wage inequality and explains the possibility of a trade-off between gender inequality and social welfare