Market

BOX 12.1 illustrative Case of the republic of korea: how Structural transformation was ultimately beneficial for women in the Context of a highly Segmented labor Market

As detailed by Ross (2008), the case of the Republic of Korea illustrates how export-oriented manufacturing (a booming traded sector) can draw women into the labor force and boost their civic commitment. When Korea industrialized in the 1960s, women began to take jobs in factories that produced goods for export.a Their low wagesb made them attractive to employers and helped fuel Korea’s economic boom: by 1975, female-dominated industries produced 70 percent of the country’s export earnings. The growth of the export sector, in turn, boosted the female share of the labor force, which rose by 50 percent between 1960 and 1980.

In 1987, female activists took advantage of Korea’s democratic opening to establish the Korean Women’s Associations United. Unlike earlier women’s organizations, it worked for improved labor conditions and women’s rights and took a more confrontational stance toward the government. More traditional women’s groups also began to focus on women’s rights. In the mid-1990s, women’s organizations started to push for greater female representation at all levels of government: the number of female representatives in the national assembly rose from 8 in 1992–96 to 16 in 2000–2004; female membership on policy-setting government committees increased from 8.5 percent in 1996 to 17.6 percent in 2001; and the percentage of female judges rose from 3.9 percent in 1985 to 8.5 percent in 2001.

The lobbying strength of the women’s movement, and the growing number of women in government, has led to a series of political reforms. These included the Gender Equality Employment Act (1987), revisions to the family laws (1989), the Mother-Child Welfare Act (1989), the Framework Act on Women’s Development (1995), and a bill stipulating that political parties must set aside for women at least 30 percent of their national constituency seats (2000).

a. leading sectors at the time were dishware, electronic goods, shoes, textiles, and garments. b. About half of male wages at the time.

(for example, business process outsourcing centers in India), and (4) the change of perceptions of parents on the returns to education. Duflo, however, points to the costs of specific measures targeting women, such as scholarships for girls or the availability of latrines in schools, which can ultimately be detrimental for boys’ access to school, especially in countries with high fiscal constraints.

Targeting the CWON wealth account variables could be a useful yardstick for policy makers. This would include the level of human capital among men and women and the percentage of human capital distributed to women. Such measures could help national authorities to establish macroindicators of achievements in reducing gender distortions and promoting more equitable distribution of human capital wealth.

How to Mitigate Public Sector Distortions

The previous section explained that RR countries have higher public sectors due, all things being equal, to political economic issues (Stefanski 2015). More precisely, Cust, Devarajan, and Mandon (2020) underline two fiscal characteristics specific to RR countries. First, citizens in those countries generally lack information about the extent of resource revenues, the services

available to them, their rights, and the quality and standard of services they should expect. For instance, two-thirds of the population in Tanzania reported that they would like more information about natural gas discoveries (de la Brière et al. 2017). Second, and more fundamentally, citizens in these countries may not have as much of an ability and incentive to scrutinize how the government spends resource revenues, relative to other forms of revenue generation such as income tax. In sum, nonrenewable natural resource revenues may lead to public expenditures, for which governments are not held as accountable compared with tax revenues, and the lack of accountability might lead to worse outcomes and worse socioeconomic opportunities for the population.19

One way to tackle the problem might be to convert resource revenues into both cash transfers for citizens and ultimately increased tax revenues for government. This would be achieved by transferring resource revenues directly to the citizens and then government taxing back some portion of these revenues. This could be done through direct cash transfers, so that citizens can spend them, and the government taxing back a portion in a second step to finance public expenditures (Cust, Devarajan, and Mandon 2020).

If successful, this mechanism could give citizens a greater stake in the government revenues originally derived from resources. This may encourage them to scrutinize the management of the sector, as well as the eventual spending of government revenues. The intuition, based on Devarajan et al. (2013), is as follows: citizens face a trade-off between spending money on private goods and scrutinizing public expenditures. The latter, if effective, could lead to more public goods. If citizens are uncertain about the extent of public revenues, they are less likely to invest time and money in scrutinizing public spending because the benefits are uncertain. The proposed transfer-cum-tax scheme reduces this uncertainty. This would increase the benefits from scrutiny, leading to greater scrutiny and, therefore, more public goods and better opportunities for the population.20 Taxation is recognized in the literature as a key factor in building accountability in government and public policies (Besley and Persson 2009). To alleviate the problem, the conversion of resource revenues into first cash transfers and then tax revenues might help reduce political sector distortions and improve socioeconomic outcomes in RR countries.

Such schemes are not without challenges, however. Governments may struggle to administer such wide-scale cash transfer programs, especially lower-income countries already struggling to invest resource revenues effectively. Further, the taxation of those cash transfers may incur a cost that might exceed any efficiency gains from the increased scrutiny. Capital-scarce economies have a lot of urgent, unmet public investment needs, and therefore large-scale public investment projects may yield a higher social rate of return than distributing revenues as cash transfers and taxing some fraction back for public use. Finally, there remain serious concerns about governments’ ability to manage inflationary pressures that large-scale cash distribution might entail.