Monday, December 5, 2016

On Her Account: Can Strengthening Women’s Financial Control Boost Female Labor Supply? With Simone Schaner

As financial inclusion and FinTech have taken on greater prominence, governments must grapple with how to best enable women’s economic empowerment. This week’s WAPPP seminar featured Simone Schaner, Assistant Professor of Economics at Dartmouth, as she presented the results of a randomized controlled trial to assess how financial inclusion coupled with targeted benefit payments impact women's labor force participation and economic welfare in India.

Professor Schaner began with a central question: Why aren’t women in emerging economies participating in the labor force? Female labor force participation has been basically stagnant despite sustained economic growth in India. However, 34% of rural non-working women say that they would like to work, and employing these women would increase female labor force participation by 80%. What is keeping them out of the formal labor force?

When we think about labor force participation, we often think about demand-side constraints – are there jobs available for those who want them? However, in this case supply-side constraints may be especially important. Women face strong gender norms and limited household bargaining power that curtails their ability to participate in the labor force. Economists think of these social constraints within a utility model: individuals may experience a utility loss if they violate a gendered behavioral norm that is upheld by the community. In the Indian context, if a woman works, it may signal that her husband has failed as a breadwinner. Even if women want to participate in the labor force, this threat of utility loss may keep them out. Data from the World Values Survey demonstrates that female labor force participation correlates with men’s and women’s attitudes toward female work. Where both men and women are supportive of working women, we see greater female labor force participation; as the gap between male and female attitude increases, female labor force participation decreases.

This particular research project focuses on poor, married couples in India who are potential beneficiaries of the public workfare program NREGS. The community exhibits strong norms against female work and mobility—only 38% of women report having gone to village market by themselves in last year. NREGS guarantees every rural Indian household 100 days of paid work at a fixed minimum wage facilitated by the local government. When these women participate in the NREGS workfare program, their wages are paid into their husbands via bank transfers. This study investigates whether strengthening women’s control of NREGS wages can increase female participation in the NREGS program and in the labor force more broadly.


Women in the field experiment were divided into five groups with two “flavors” of financial inclusion.  In the “Accounts Basic” group, the study team opened low-cost, no-frills bank accounts at community banking kiosks. After their paperwork was processed, the women in this group were taken back to the kiosks to demonstrate deposits and withdrawals. In the “Accounts Plus” group, the women also received a group-based training session that emphasized what a bank account is and what can be done with it (receiving benefits transfers like NREGS, the importance of saving, and how money kept in a bank account is safe). In two additional groups “Accounts Basic Linking” and “Accounts Plus Linking,” the women received the same services described above, but their accounts were configured such that their NREGS wages were paid directly into their accounts, rather than their husbands’. The fifth group, a control, received no financial inclusion services or training. This design allowed the research team to examine how control over NREGS wages impacts female labor force participation while holding financial inclusion (including access to banking services) constant.


Initial survey data revealed that women in the study had opened accounts, but rarely used them. In the Accounts Basic group, 17% of women had been to the bank in the last six months, compared to 10% in the control group. While this figure was somewhat higher in the Accounts Plus and the Accounts Plus Linking groups, these accounts were only used occasionally. However, this intervention had a major impact on women’s bank balances. For women who received NREGS payments, they received an average of $61 – 26% of a woman’s non-NREGS average annual income. While it’s not clear that this additional income is sufficient to change household bargaining power, the intervention certainly increased women’s control of assets. Women in the Accounts Plus Linking group also increased their labor force participation – they did more work in the NREGS program and also did more work in the private market.


One possible mechanism for this shift is that the intervention increased a woman’s effective NREGS wages – while the official wage didn’t change, their increased control over their wages may have made NREGS work more attractive. However, if this were the case, we wouldn’t expect to see an increase in private sector work as well; NREGS work would have been more attractive at the expense of private sector work paid in cash. Similarly, when women’s bargaining power increases, economic models say that they will consume in terms of consumption and leisure, so we wouldn’t see the increase in both NREGS work and private labor. However, this standard model completely ignores the importance of norms – specifically here, the male preference that their wives don’t work. If men hold these preferences and yet women’s bargaining power increases, then we would expect to see this across-the-board increase in female labor force participation. Indeed, these effects are stronger for women who were constrained (not working) before the study began.


Strengthening women’s control over government workfare benefits increases participation in workfare and increases work on the private market. There is some evidence of increased female mobility and no evidence of male backlash in terms of reduced decision-making power, gender-based violence, or negatively impacted mental health. The broader implication of this study is that the impacts of female empowerment on female labor force participation may vary depending upon the extent to which men and women internalize gender norms and social constraints. The study team is planning a richer data collection to come, and we look forward to hearing additional results!

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