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This means that productivity will be increased if women’s skills and talents are used at their fullest. Also, when women have greater control over the household resources in a country, this country might have a higher economic growth, and it is because women are generally more willing to spend for children’s health and education (World Bank 2012). In Latin America,
“women’s access to paid opportunities, and the narrowing of gender gaps are crucial for growth, equality and poverty reduction in the region” (OHCHR 2011, 5).
However, despite the closing disparity that has been created between the number of working women and men in Latin America, on average there still is an existing gap that sums to more than 25% (United Nations 2019a). Another analysis shows that in pay scale when comparing women and men in the same age range, education achievements and economic status for each hour worked women’s wage were on average 17% below those of men (United Nations 2019a).
In addition to gender inequality, it is also important to point out that ethnic cleavages might be linked with economic growth. For instance, the groups that present the lowest economic percentiles of income distribution and also face more obstacles in accessing sustainable income and educational opportunities are women, Afro-descendants and indigenous people (Montalvo and Reynal-Querol 2005). Therefore, many ethnic minorities in an ethnically fractionalized society might suffer from inequality, which might reduce economic growth.
1.2 Why economic growth?
In January 2016, the United Nations (2019b) announced that the Sustainable Development Goals (SDGs) would apply in a universal way to all UN members, and they must make efforts to end all forms of poverty and, inequalities (United Nations 2019b). One of the principal goals is to stimulate economic growth, decent work for all the members of society and employment. But why does economic growth matters? According to United Nations, between 1991 and 2015 in developing countries, 34% of the total employment was composed by the middle class reducing the amount of people living in extreme poverty (United Nations 2019a). Yet, the global economy has grown slowly, inequality has been widened, and employment has not been expanding quickly enough to sustain the exponential labor force. In 2015 about 204 million people were
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suffering of unemployment, according to the information provided by the International Labour Organization (United Nations 2019a).
In addition, approximately half of the population in the world is still living with approximately US$2 a day causing the rates of global unemployment to rise up to 5.7 percent (United Nations 2019a). The slow and uneven economic growth makes people retool economic and social policies that could help eradicate poverty. As mentioned in the United Nation’s (2019a, 1) Sustainable Development Goals principals regarding to economic growth:
Even though the average annual growth rate of real GDP per capita worldwide is increasing year on year, there are still many countries in the developing world that are decelerating in their growth rates and moving farther from the 7% growth rate target set for 2030. As labor productivity decreases and unemployment rates rise, standards of living begin to decline due to lower wages.
Society needs to provide better conditions that can allow their citizens to have access to quality jobs so that the economy can be stimulated and growth can be achieved. Decent working conditions and more jobs opportunities are key factors for the whole labor force. The access to financial services must be increased so that people can accumulate assets, make productive investments and manage incomes. Also, an increase in banking, agriculture infrastructure and trade will help boost productivity and reduce employment in the most vulnerable regions in the world (United Nations 2019a). The encouragement to achieve sustainable economic growth will help countries to achieve more advances in technology and greater levels of productivity.
According to Werner (2020), Latin America presented a stagnated economic activity in 2019. In the period of 2014-2019 the real GDP per capita in the region declined on an average of 0.6%
per year (Werner 2020, 2). This fragile momentum largely constrained by slow productivity growth, low quality of education and infrastructure, low investment and difficulties in the business sector. Moreover, the global growth and commodity prices have held back growth and, the effects of policy uncertainty. There are various reasons for, social unrests in many Latin
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American countries in recent years, but these social unrests generally mirror the historical discontent with some economic and political aspects (Werner 2020, 2).
As a matter of fact, Werner (2020) explained that the IMF established that regional challenges are coming with an elevated policy uncertainty in several large countries and a continued economic rebalancing in already stressed economies like Argentina and Ecuador. But most recently, countries such as Bolivia, Colombia, Chile and Ecuador have been experiencing social unrest creating a space for governments to consider alternative policies to create growth in a more inclusive way by addressing social demands (Werner 2020).
According to Werner’s (2020) analysis, the estimations in the GDP growth percentage for 2018-2021 reflect none or low improvement. In South America, Brazil growth remained passive at 1.2% in 2019 according to the IMF, while Chile is being subject to social unrest and trying to hang onto by developing policy in respond to the social demands. Colombia showed a growth of 3.3% in 2019 and a projected acceleration in the current year. On the other hand, Peru experienced a slowdown in 2019 of 2.4% and Venezuela remains immersed in a deep economic and humanitarian crisis (Werner 2020, 4). Moving towards, Mexico’s economic activity deteriorated in 2019 because of the policy uncertainty and growth is expected to recover 1% in the current year. Central America experienced a growth of 3.9% due to the support of Panama, Costa Rica and Dominican Republic. Honduras, Guatemala, El Salvador and Nicaragua are still struggling with deeper issues such as economic recovery, corruption and political tensions(Werner 2020, 5).
The discussion above suggests that it is crucial to study why some countries has a better economic performance than others because sustainable economic growth will help countries to achieve higher levels of productivity, technological innovation, and people’s wellbeing. In addition, it is interesting to examine what drives economic growth in Latin America not only because there is great variation in levels of economic growth for different countries, but also because this region has suffered economic stagnation recently. Therefore, it is necessary to study how to make economies revive.
As mentioned above, studies have shown that gender inequality and ethnic fractionalization matter for explaining economic growth. However, most existing studies test the effect of gender
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inequality and ethnic fractionalization separately (Braunstein 2012; Collier 2001; Easterly and Levine 1997; Kabeer and Natali 2013; Klasen 2000, Montalvo and Reynal-Querol 2005; Seguino 2000a, 2000b, 2010; Young 1995). Differing from these studies, I argue that ethnic fractionalization is an important moderator variable in the relationship between gender inequality and economic growth. Specially, I hypothesize that a country with a wider gender gap and a higher degree of ethnic fractionalization is more likely to have low economic growth.
To test this hypothesis, I utilized mixed-methods for conducting quantitative and qualitative analyses. For the quantitative analysis, I focus on gender gap in education, labor force, and employment, respectively. I test my hypothesis using the interaction variable approach based on data from 18 Latin American countries from 1980 to 2018. Following the statistical analysis, I continue with a qualitative case study by creating a comparative analysis of Chile and Bolivia. I examine the situation of Chile and Bolivia in regards of gender inequality and ethnic cleavages to analyze why Chile achieved a higher level of economic growth than Bolivia. Overall, this study aims to contribute to the literature of economic development by facilitating a better understanding of the causes for the low economic growth in developing countries.
This thesis is organized into six chapters. Chapter one introduces the study by outlining the research’s main question, and the importance of the findings of this research. Chapter two provides a review of the existing literature regarding economic growth and the existing gap followed to a detailed discussion of the theoretical argument. Chapter three provides a general background in regards gender inequality and ethnic groups in Latin America to better understand the situation of the region and the importance to the research. Chapter four introduces the empirical methodology, the variables used as well as a discussion of the empirical results.
Chapter five provides a comparative analysis of Chile and Bolivia by examining the situation in regards of gender inequality and ethnic fractions and their effect in economic growth. Finally, chapter six wraps up the thesis by providing a summary of the research topic, hypothesis and findings as well as several policies recommendations.
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Chapter Two: Theoretical Perspectives