Women empowerment and good times: Which one leads to the other?

Does substantial women empowerment lead to significant output, or do good times lead to women empowerment? Using a panel VAR study as well as a comprehensive gender gap index and its sub-indices from the World Economic Forum, this study investigates the association between gender gap and per capita output for OECD countries, developing countries, as well as Latin American and African countries. Results confirm the existence of bidirectional Granger causality between gender gap and output. On the one hand, good times encourage equity for both sexes. On the other hand, women empowerment helps middle- and low-income countries prosper and significantly improve their human capital, which, in turn, drives long-run economic growth. Moreover, the Latin American and African nations show qualitatively similar but quantitatively greater responses compared with developing nations. By contrast, closing the gender gap negatively affects OECD output. For the sample of developing countries, the aforementioned results are robust to sub-indices measured by gender gap in economic participation as well as opportunity, educational attainment, and political empowerment. We recommend that gender policies specifically aim at eliminating gaps in female education.