Global Gender Distortions Index Shows How Inequality in Work Hurts Productivity Worldwide

The World Bank’s Development Economics Development Policy Team, working with the Yale Economic Growth Center, the University of Geneva, and the Aix-Marseille School of Economics, with support from the Gates Foundation and the Structural Transformation and Economic Growth (STEG) initiative, has launched a groundbreaking framework for understanding the economic cost of gender inequality in labor markets. The Global Gender Distortions Index (GGDI) captures the percentage loss in total economic output caused by the misallocation of talent between men and women. This index stands apart from traditional gender measures by combining data on earnings, education, and job types into a model-based figure that can be compared across countries, years, and even subnational regions. Crucially, it distinguishes between labor demand distortions, such as discriminatory hiring practices and wage penalties, and labor supply distortions, such as social norms or institutional barriers discouraging women from market work.

A New Lens on Gender Gaps

Using large datasets such as the Harmonized World Labor Force Survey and India’s Periodic Labour Force Survey, the GGDI offers a sharper view of persistent disparities. Women remain more likely than men to be in unpaid or informal work, and less likely to hold wage-paying jobs, even when their education matches or exceeds that of men. In low-income countries, only 16 percent of women work for wages compared to 37 percent of men, while in high-income countries the figures rise to 61 and 69 percent, respectively. In richer economies, women often have slightly more schooling than men, yet income gaps persist, with women in wage work earning 20 to 35 percent less. While some countries have made progress in expanding women’s participation in wage and self-employment and reducing pay gaps, the pace varies greatly.

Global and Regional Contrasts

The GGDI results reveal stark contrasts across countries and over time. In the United States, gender-based misallocation dropped from about 7 percent of GDP in 1970 to under 2 percent in 2020, driven by steady declines in both demand and supply distortions. The analysis shows demand distortions, those stemming from employer behavior and labor market structures, have a larger economic cost than supply distortions linked to domestic constraints or norms. India, on the other hand, despite decades of economic growth, has seen no improvement in gender misallocation, underscoring the deep-rooted nature of the problem. Case studies of countries such as Brazil, Chile, and South Korea show mixed results, with some achieving notable reductions while others remain stagnant.

Cross-country comparisons reveal a negative correlation between GDP per capita and GGDI values, with wealthier nations generally experiencing less gender-based misallocation. Yet there is significant variation among countries at similar income levels, showing that economic development alone does not guarantee gender equity. In some Middle Eastern and North African economies, eliminating distortions could raise productivity by as much as 20 percent, while in parts of Latin America, the potential gain is under 5 percent.

Why Demand Distortions Matter Most

The study underscores that removing demand distortions alone often yields nearly all the welfare gains achievable from eliminating both types of barriers. Demand-side obstacles frequently prevent women from entering the labor force altogether, so their removal leads to significant productivity boosts. By contrast, removing supply distortions, such as household responsibilities or restrictive norms, has less impact if demand barriers persist. Moreover, the GGDI’s relationship to GDP is nuanced: GDP excludes unpaid household production, meaning the GDP increase from removing distortions is typically larger than the GGDI suggests. When women shift from unpaid domestic work to market-based roles, measured GDP rises even though their overall contribution to economic output has always been substantial.

Subnational Insights from India

Applying the GGDI at a subnational level illustrates its practical policy value. In India, state-level GGDI estimates range from 5 to 15 percent, with poorer states losing more economic potential to gender-based misallocation. States like Kerala and Tamil Nadu, with stronger educational and labor market outcomes for women, exhibit lower misallocation. As in the global data, demand distortions have a greater economic effect than supply distortions, signaling that targeted policies to reduce employer discrimination and structural barriers could yield outsized benefits.

The GGDI also aligns closely with the World Bank’s Women, Business and the Law Index, which measures legal equality between men and women. The strong negative correlation of 0.74 between the two suggests that countries with better legal protections for women tend to have lower misallocation. However, the existence of exceptions underscores that laws alone are not enough; effective enforcement and cultural change are equally critical.

A Policy Tool for Growth and Equality

Robustness checks confirm that the GGDI is stable across reasonable changes in the elasticity of substitution between job types, though more sensitive to the elasticity of labor supply. The authors recommend further research to refine these estimates and adapt them to country-specific contexts. By quantifying the macroeconomic cost of gender-based barriers, the GGDI reframes gender equality as not just a social or moral imperative but as a measurable economic growth strategy.

With its adaptable design and openly shared computational tools, the GGDI equips policymakers with a concrete, comparable benchmark to track progress and prioritize reforms. Its message is clear: dismantling discriminatory demand-side barriers offers the largest and most immediate gains. Combined with broader measures to address supply constraints, such reforms could unlock significant productivity potential, reduce inequality, and accelerate national development. Far from being an abstract metric, the GGDI serves as both a mirror reflecting economic loss and a roadmap for harnessing the full talent pool, making gender equity not just a matter of justice, but of smart economics.