Services Trade: The Great Gender Equaliser?

Date01 August 2021
AuthorHildegunn Kyvik Nordås,Louise Johannesson
Publication Date01 August 2021
Services Trade:
The Great Gender
Louise Johannesson1 and
Hildegunn Kyvik Nordås2,3
Standing at 24% in 2018, India’s female labour force participation is only half of
the global average (48%). At the same time, India has one of the widest gender
wage gaps in the world and women are less likely to be employed in the formal
sector compared to men. This article focuses on how international trade affects
relative wages and formal employment between men and women in India. Using
the Revealed Symmetrical Comparative Advantage index, sectors of comparative
advantage and disadvantage are identified and matched to Indian labour force
surveys that contain information on sectoral employment and earnings. We find
that sectors of comparative advantage in services have the lowest gender wage
gap, with women earning 24% less than their male counterparts, while women in
manufacturing earned on average 40% less than male workers. Using the Oaxaca–
Blinder decomposition, we find that the total gender wage gap in sectors of
comparative advantage in services are minor while it is quite substantial in manu-
facturing, regardless of comparative advantage status. The article concludes that
services trade goes hand in hand with a smaller gender wage gap as women lever-
age their skills better in services than in manufacturing.
JEL Codes: F16, F14
Gender, services trade, jobs, earnings
1 Research Institute of Industrial Economics (IFN), Stockholm, Sweden.
2 Örebro University, Orebro, Sweden.
3 Council of Economic Policies (CEP), Switzerland.
Corresponding author:
Hildegunn Kyvik Nordås, Örebro University SE-702-81, Örebro, Sweden.
Foreign Trade Review
56(3) 341–363, 2021
© 2021 Indian Institute of
Foreign Trade
Reprints and permissions:
DOI: 10.1177/00157325211011845
342 Foreign Trade Review 56(3)
Over the past few decades, India has made strides in narrowing the gender wage
gap. The difference in average pay between men and women as a share of average
men’s wage has come down from 48% in 1993–1994 to 34% in 2011–2012 (ILO,
2018). Standing at 29% in 2017, India has one of the lowest female labour force
participation rates in the world. For comparison, the female participation rate was
69% in China, 66% in USA and 57% globally.1 Furthermore, only around 9% of
employment in India is salaried or regular jobs, and of those, women hold 18%.
During the past few decades, India has also become one of the major services
exporters in the world. This article analyses a possible connection between the
rise of India’s services exports and the narrowing of the gender wage gap. For
benchmarking and comparison, we analyse the manufacturing sector on the same
metrics as services.
There are three main channels through which trade may affect women’s
employment and wages. First, if sectors of comparative advantage employ rela-
tively more women, women may gain from trade and trade liberalisation (Nordås,
2003). Second, in a setting of heterogenous firms and entry costs in foreign mar-
kets, the smallest and least productive firms will exit the market and the largest
and most productive firms will expand and export in the event of trade liberalisa-
tion (Melitz, 2003; Nataraj, 2011). If women are more likely to work in small and
less productive firms, they will lose from trade. Both these channels affect women
through pre-existing biases and do not necessarily imply discrimination of women
in the sector or firm they work in.
The third channel operates through raising the cost of discrimination. If trade
put firms’ profit margins under pressure, they would look for ways to cut costs.
Gender discrimination may contribute to higher unit labour costs, which firms can
no longer afford in the face of stronger competition (Becker, 1971).
Given India’s industrial structure and gender composition of employment, one
would expect that women gain through the first and third channel but may lose
from the second. However, our analysis finds that although women’s share of
employment is higher than average in textiles, clothing and chemicals, which are
sectors of revealed comparative advantage (RCA), the relationship between
comparative advantage and gender shares in employment is not strong. The first
channel thus appears not to be important. We also found no systematic gender
differences in the composition of employment by firm size, at least for the size
categories available in the data. We are then left with the cost of discrimination as
the main channel through which trade could affect the gender wage gap.
Our main source of data is the Indian National Sample Survey (NSS)
Employment and Unemployment Survey for the years 2000, 2005, 2010 and
2012. These surveys provide rich information on worker-level characteristics,
daily wages, sector of employment and geographic location. Using trade data
from World Input–Output Database (WIOD), we calculate revealed symmetrical
comparative advantage (RSCA). With this information at hand, we can trace
employment patterns by gender, and by sectors of comparative advantage and

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