3. Azania Dewan

MACROECONOMICS AND GENDER26

Engendering Market Structure

A Normative Analysis

RITU DEWAN & AZANIA THOMAS

ACKNOWLEDGEMENTSAzania Thomas would like to show thanks and appreciation toDr.Ritu Dewan Dr.Sayantan Ghosal, Dr.Dania Thomas, Mr.ChrisWay and her mother for guidance, inspiration and support inwriting this paper.

INTRODUCTION‘Most economists are trained to think that macroeconomics is aboutaggregates – for example, the level of employment or exchange rates.What we are trying to demonstrate is that behind those aggregates arethe behaviours of different groups of people.’– Nilufer Cagatay, 2005.

Markets reflect the ‘behaviours of different groups of people’and form part of an intrinsic blueprint that dictates the function-ing and effectiveness of macroeconomic theory and policy. Theincorporation of gender discrimination into the mix exposes dif-ferent constraints about how both function. Some of these con-straints are prevalent when light is thrown on the interaction ofnormative principles and gender discrimination in situations ofmarket failure.

As explained in the second section of this essay, gender dis-crimination is utilised by markets to achieve Pareto efficiency. Forexample a monopsonist that wage discriminates on the basis of

27RITU DEWAN & AZANIA THOMAS

gender is clearly in conflict with issues of distributional justice(strict egalitarianism). This is even if the strategy of profit maxi-mization adopted by the monopsonist is a socially efficient out-come. In view of possibilities like the one examined, policy forma-tion needs to account for the normative implications that under-lie the links between gender discrimination and market failure. Inother words, this section shows that gender discrimination thoughdistributively unjust and thereby unequal, may or may not leadto ‘inefficient’ market outcomes.

Section III examines situations where gender discriminationleads to market failure and can be resolved both on egalitarian andsocial efficiency grounds. Illustrations of gender sensitive barriersto market entry include the lack of access to information wherewomen (amongst other socially disadvantaged groups) are far worseoff when it comes to being isolated from credit or labour marketsdistorted by historical gender constructs.

Inadequate attention is given to skills in the sphere of non-market work, the purveyors of which are mostly women. Non-market work represents a hidden reservoir which is inadequatelyrecognized as a potential starting point from which developmentin skills can lead to their marketability across a given trade orenterprise. The outcome of gender discrimination in relation tothe issue of non-market work is also socially inefficient.

Finally, isolation from formal credit markets and lack of col-lateral also poses a serious barrier to credit access for women. Thisis again mainly on account of the inefficiencies that have resultedfrom pre-existing historically defined gender constructs. Womenwere barred from potential sources of productivity as is clearlyevident in existing laws relating to private property, for example,The Hindu Succession Act (1956) and Hindu Succession Act(Amendment) 2005. There exists a minute aspect of such legisla-tion that continues to gender discriminate in a socially inefficientmanner and also on egalitarian grounds. It is arguably the casethat in situations where gender discrimination is socially efficient,then normative concerns of distributive justice are more likely tomake engendered theory and policy effective. It is with a view to


increasing this effectiveness that normative principles need to beexamined to reveal the nuances of gender discrimination in a mar-ket framework.

ANALYSING TWO NORMATIVE PRINCIPLES: PARETOEFFICIENCY AND DISTRIBUTIVE JUSTICE

This section briefly analyses, two normative principles: Pareto ef-ficiency and distributive justice with a view to understanding howthey can be used to deal with existing gender inequalities within amarket framework.

Pareto EfficiencyPareto efficiency was a concept first used by Italian economistVilfredo Pareto in 1906, and was designed to capture the amountof waste or ‘friction’ within economic mechanisms and therebyindicate how efficiently they operate.

In this context, resource allocation mechanisms such as mar-kets can be Pareto inefficient or Pareto improving, if for a given setof alternative allocations and a set of individuals, there is a facili-tated movement from one alternative allocation to another whichmakes an individual(s) better off while making no otherindividual(s) worse off. Markets are Pareto efficient where no fur-ther Pareto improvements can be made.1 The case for inefficiencythus implies room for Pareto improvement (where there is theexistence of potentially mutual advantageous trade or profitableproduction decisions. Hence the question of why a particular re-source allocation mechanism is inefficient can be rephrased to askwhy Pareto improvements do not occur.

This could happen in situations in which (a) Individuals donot have sufficient information to seek out profitable or advanta-geous opportunities, (b) Individuals do not have sufficient con-trol (or even access) over commodities (including productive as-sets) to affect profitable or advantageous opportunities, and (c) Ifindividual parties to a trade cannot agree on how to share gainsfrom their mutually advantageous exchange.

Pareto efficient outcomes are not always desirable especially if


they are unequal and thereby inconsistent with the principles ofdistributive justice. Markets function efficiently even in situationswhere there exists gender discrimination. In other words, genderdiscrimination can be both Pareto-efficient and unequal, as in thecase of the monopsonist who wage discriminates according to gen-der or in cases where there is a lack of access to productive re-sources on account of historical gendered constructs.

Distributive JusticePrinciples of distributive justice are normative principles designedto allocate goods in limited supply relative to demand. The prin-ciples vary along several dimensions depending on the kind ofgoods sought to be distributed (income, wealth, opportunitiesetc), the subjects to whom goods are sought to be distributed(individuals, groups, preferences) and the basis on which the goodsare sought to be distributed (equality, individual characteristics,according to free market transactions etc). 2 We examine distribu-tive justice in terms of the end-state theory. This theory examinesthe distribution of goods among members of society at a specifictime to assess whether the distribution is just.3

The end state theory incorporates strict egalitarianism and onthis basis aims to reduce or eliminate differences between indi-viduals or households in a society. It is important to note thatadvocates of strict egalitarianism most often want to eliminate allforms of gender discrimination on the basis of relative equality.The lack of access to information, credit, productive resources anduntapped skill potential which have resulted from fundamentalimbalances in gender relations is viewed as unequal amongst thegenders from a relative position.

It is however important to mention that certain forms of gen-der discrimination under the Rawlsian criterion of distributivejustice, for instance can be viewed as desirable on the basis of the‘Difference Principle’. John Rawls, in his A Theory of Justice, devel-oped the Difference Principle where economic and social inequali-ties can only be justified, if their most disadvantaged membersbenefit on account of them.4 In this context, a monopsonist that


wage discriminates according to gender is justified by the factthat more women would be employed, who otherwise would re-main unemployed.

GENDER DISCRIMINATION THAT IS PARETO EFFICIENTWe begin here by describing the underlying basis of inefficiency(in previously mentioned point c, p. 00), that is, situations inwhich individual parties to a trade cannot agree on how to sharegains from their mutually advantageous exchange. In the case of amonopsony, there is an inherent deadweight loss, where there isexcess involuntary unemployment due to the charging of a singu-lar monopsony wage rate. The mutually advantageous exchange isthe potential increase in producer surplus at the cost of hiringmore labour. This does not occur, as it is not in the profitmaximising interests of the monopsonist to charge a singular com-petitive wage rate.

The monopsonist can however factor in gender discrimina-tion within profit maximising interests, by hiring total labour atthe competitive level and charging for instance, lower reservationwage rates for women as compared to men. In the case of thirddegree wage discrimination, a monopsonist can further segmentlabour into markets on the basis of gender, where more womenare hired at lower wage rates as compared to men. The result isPareto efficient, both producers and workers have arrived at how amutually advantageous exchange or the reduction of deadweightloss can be achieved through gender discrimination.

The analysis then proceeds to find similar ground with neo-classical and segmented labour market approaches to gender dis-crimination.

A well-documented examination of the economic analysis ofdiscrimination can be found in Stephen. W. Smith’s ‘Labour Eco-nomics’ (2003), which focuses upon ‘the possibility that signifi-cant wage and employment differences persist between groups inthe labour force and how these are not justified by differentialproductivity and human capital investment. The impact of gen-der and racial characteristics on earnings and employment out-


comes are regarded as labour market consequences of discrimina-tion.’5

Smith examines two main schools of economic thought re-garding discrimination. One is the neoclassical theory stemmingfrom the work of Becker (1957) and Robinson’s (1933) ‘Theoryof Monopsony’, where ‘prejudice is expressed in discriminatorytastes on the part of employers’. An alternative to the segmentedlabour market approach is historically traced back to the ‘Theoryof Non-Competing Groups’ in the work of Mill (1885). This ap-proach essentially maintains that the labour market is ‘split intosectors including delineations according to sex and racial origin,and that there is very little interaction between the sectors’. Ex-amples of this approach are the ‘job crowding hypothesis’ and the‘dual labour market’ hypothesis.6

Perfect wage discrimination by a monopsonist reflects the neo-classical theory of discrimination; in particular, Robinson’s ‘Theoryof Monopsony’ (1933). The analysis is augmented by how Pareto–efficiency is achieved within such a market structure by exploitingan existing gender inequality. Third-degree wage discriminationby a monopsonist, however, bears close resemblance to the seg-mented labour market approach, the only difference being thatthe latter approach operates within a competitive framework andthat the monopsonist is able to wage discriminate between menand women on the same jobs and productivities instead of thembeing different.

For greater comprehension, the dead weight loss, first andthird degree price discrimination of a monopoly is comparedthroughout with the analogue of a monopsony. We first begin byexamining the case of deadweight loss by a monopolist.

The Deadweight Loss of a Monopoly‘A competitive industry operates at a point where price equalsmarginal cost. A monopolist operates where price is greater thenmarginal cost. Thus in general, the price will be higher and theoutput lower if a firm behaves monopolistically rather than com-petitively.’7


Fig. 1: The Deadweight Loss of a Monopoly

Fig. 2: The Deadweight Loss of a Monopsony


This is Pareto-inefficient due to the resultant deadweight lossas denoted in Fig.1. For the sake of measuring the deadweight lossin either market structure, we costlessly enforce the condition ofperfect competition. The monopolist will now sell larger outputYc at market price Pc, which is lower then Monopoly price Pm,where output was constricted at Ym. Pareto inefficiency lies in thefact that there is a whole range of output that is not being pro-duced and made available to consumers at lower prices.8

The monopolist’s surplus goes down by Area A due to thelower price on the units he is already selling. It goes up by Area Cdue to the profits on the extra units he is now selling. Theconsumer’s surplus goes up by Area A, since the consumers arenow getting all the units they were buying before at cheaper pricePc and it goes up by Area B, since they get some surplus on theextra units that are being sold. The area A is just a transfer fromthe monopolist to the consumer: one side of the market is betterand one side is made worse off, but the total surplus does notchange. 9

The Area B+C represents a true increase in surplus –this areameasures the value that the consumers and the producers place onthe extra output that has been produced. The Area B+C is knownas a deadweight loss due to the monopoly condition. It provides ameasure of how much worse off people are, paying the monopolyprice than paying the competitive price.10

The Deadweight Loss of a MonopsonySimilarly, a monopsony will now hire workers at perfectly com-petitive wage rate Wc and hire labour at Lc, instead of constrict-ing the hiring of labour at Lm thereby exerting control by charg-ing lower wage rate Wm. Pareto inefficiency lies in the fact thatthere is a whole range of labour that is not being hired (betweenLm and Lc).

The monopsonist’s surplus goes down by Area A due to higherwages Wc. It goes up by Area B due to the increase in marginalrevenue product. The worker surplus goes up by Area A due tohigher wages and by Area C due to extra workers hired at Lc.

Area A is a transfer from monopsonist to workers where there


is no change in total surplus. Areas B+C, however represents atrue increase in surplus value and the deadweight loss at monop-sony wage rate Wm.

So how does one factor in such Pareto inefficiency to make itPareto efficient in the profit maximising interests of both marketstructures?

The deadweight loss or Pareto inefficiency can be reduced if amonopsonist is able to capture the entire worker surplus andthereby maximise producer surplus by hiring labour at differentreservation wages. We proceed to examine the cases of perfect andthird degree price/wage discrimination of both market structuresrespectively.

Pareto Efficiency and Perfect PriceDiscrimination Under a MonopolyThe monopolist will behave as a perfectly competitive seller asearlier stated. It will produce at an output level where theconsumer’s marginal willingness to pay equals marginal willing-ness to produce: at Price and output combination (Pc, Yc).

At the same time, the monopolist will engage in the condi-

Fig. 3: Pareto Efficiency and Perfect Price Discrimination Under a Monopoly


tion of price discrimination, where the aim is to maximise profits(producers surplus) subject to the maximum price (reservationprice) that the consumer is willing to pay for the good or service.

(I.e.) The monopolist will charge price P1 (to Consumers will-ing to pay P1 for output level Y1) or charge price P2 (to Consum-ers willing to pay P2 for output P2) and produce a maximumoutput at marginal cost (At price and output combination (Pc,Yc). In this way the monopolist can maximise producer surplusand appropriate all consumer surplus for itself.11

The outcome is Pareto-efficient—there is no way to make bothindividual consumer and producer better off: the producer’s profitcannot be increased: since he/she already has a maximal profit.Consumer surplus cannot be increased without reducing the profitof the producer.12

Pareto Efficiency and Perfect Wage DiscriminationUnder a MonopsonySimilarly, a monopsonist will behave as a perfectly competitivebuyer of labour but with a difference. Workers will be hired till

Fig. 4: Pareto Efficiency and Perfect WageDiscrimination Under a Monopsony


a level where the worker’s marginal willingness to supply labourequals the monopsonist’s marginal willingness to hire labour: Atwage rate and worker input combination (Wc, Lc).

The difference is that the monopsonist will still maximizeprofits (producer’s surplus) subject to the maximum wage rate(reservation wage) that the worker is willing to supply labour. Theproducer will charge wage rate W1 (to workers willing to supplylabour at L1 and accept wage rate W1). In this way the produceris able to charge different reservation wages upto Wc.

The outcome will be Pareto-efficient where there is no way tomake both individual worker and producer better off: theproducer’s profit cannot be increased since he already has a maxi-mal profit. Worker surplus cannot be increased without reducingthe profit of the producer.

It is essential to note that the monopolist or monopsonist willneed to have perfect knowledge of individual consumers’ demandcurves or individual workers’ supply curves respectively, whichmay not be possible. But even in the second-best situation, thecondition of pareto-efficiency has been established by a monop-sonist who is able to exploit situations where fewer women arehired for a lesser wage rate as compared to more men who arewilling to be hired for a higher wage rate.

Apart from Pareto–efficiency, perfect wage discrimination bya monopsonist, reflects the neo-classical approach of Joan Robinson’stheory of monopsony (1933). Her theory reflects mobility costsincurred by women, due to social convention via the differencesin elasticity of supply curves between men and women. The laboursupply curve of men is perfectly elastic compared to that ofwomen.13 In Fig. 4 above, a woman’s lack of mobility can also bereflected on lower points of the common supply curve, say at wagerate and labour combinations (Wm, Lm and W1, L1). Apart frommobility costs and ignorance of better job conditions, perfect wagediscrimination is also able to exploit a woman’s ‘amenability’ towork for lower paid jobs due to social conditioning on the part ofthe employer and employee.

We take the analysis further via the description of the morecommon form of third degree wage discrimination.


Fig. 5: Pareto Efficiency and Third Degree Price Discrimination

Fig. 6: Pareto Efficiency and Third Degree Wage Discrimination


Pareto Efficiency and Third Degree PriceDiscrimination Under a MonopolyWe begin by examining the analogue of third degree price dis-crimination by a monopolist.

Consumers are separated into two independent markets (Mar-ket a and Market b) and a separate price is charged for each mar-ket. In Market a+b: The (Marginal Revenue) MR curve is foundby horizontal additional of two MR curves in Market a and Mar-ket b. The total profit is maximised where MC is equal to MR ineach market. MR must be the same in both markets otherwiserevenue could be increased by switching output in the marketwith the higher MR. The profit maximising price in each marketwill be given by the relevant demand curve.14

Thus in Market B: Less output (Yb) is sold for a higher price(Pb) as compared to Market A: Greater output (Ya) is sold for alower price (Pa). The lower price is charged to the demand curvethat is more elastic.15 An example of third degree price discrimi-nation is different priced seats on buses for adults and children ordifferent prices for the same product sold in different countries.16

Pareto Efficiency and Third Degree WageDiscrimination Under a MonopsonyThe monopsonist is able to exploit situations where more womenare willing to supply labour at lower reservation wage rates wheretheir supply curves are more elastic.

Workers are now grouped into the two markets a and b, ac-cording to the elasticity of their labour supply curves, where aseparate wage is charged for each market. Let market b be themarket for male workers and market a being the market for femaleworkers.

In market, a+b, the MRP curve is found by the horizontaladditional of both MRP. curves in Market a and Market b. Totalprofit is maximised where MC is equal to MRP in each market;MRP must be the same in both markets otherwise revenue couldbe increased by hiring labour in the market with the higher MRP.

The profit maximising price in each market will be given bythe relevant labour supply curve. Thus in Market a: Less male


labour (Lb) is hired for a higher wage rate (Wb) as compared toMarket a: QUERY RITU More female labour (La) is hired for alower wage rate (Wa). The lower wage is charged to the supplycurve that is more elastic.

In the case of a monopolist, a necessary condition for effi-ciency to increase when price discrimination is implemented isthat total output should increase. If output remains constant ordecreases when price discrimination is allowed, total welfare mustnecessarily decline. Similarly in the case of a monopsony, a neces-sary condition for efficiency to increase is that total labour shouldincrease through the condition of wage discrimination.17

Without price discrimination, small niche markets may notbe well served, if the monopolist is required to charge a uniformprice. Similarly, wage discrimination can provide very significantefficiency gains since it allows markets for female labour to beserved that would have not occurred earlier if the monopsonisthad to charge a singular wage rate.

It is interesting to note that to prevent the resale of output, amonopolist has to have a definitive manner of segmenting mar-kets, where mechanisms are enforced to clearly differentiate con-sumers. The ‘job crowding hypothesis’ of the competitive seg-mented theory of labour markets, depicts how a disproportionatenumber of women (possessing equal ability as their male counter-parts) are excluded from higher paying jobs which depresses wagesin the fewer occupations they are crowded into. This is donethrough the pressure of male trade unions, a crude veto on hiringwomen, lengthy training or an employment history, which re-sults in the inevitable segmentation of the labour market. Themonopsonist is able to effectively segment markets based on thesame job and same productivity, by enforcing the latter two con-ditions i.e. lengthy training or the need for an employment his-tory. (That is, women can be made to perform the same jobs, astrainees or employees that are subcontracted or temporary). Thiscan possibly have an effect on the amenability of more women towork for lower wages thereby depicting a greater elasticity in theirsupply curves. (See Fig. 6)


HOW CAN GENDER DISCRIMINATION BE RESOLVEDEVEN IF PARETO-EFFICIENT?

End-state theories rely on the principle of strict egalitarianism todo away with the forms of gender discrimination incorporatedwithin the market structure of a wage discriminating monopsony.Distributive justice is no longer concerned with reducing the dead-weight loss of hiring more workers at different wage rates, but byequalizing wage rates for both sexes.

In this context, we examine the case of equalizing the monop-sony wage rate to a minimum wage rate that is equal to all andwhere more labour is hired. Minimum wage policy is likely to beinfluential but more so from an egalitarian point of view ratherthen a market efficiency point of view, especially when depictedin the third regime as explained below. There are three classes orregimes, according to the value taken by the minimum wage, as isseen by the following table:

Table 1: Minimum-wage regimes in monopsonistic labour markets

Minimum wage Resulting equilibrium

First regime Not higher than Unchanged frommonopsony wage monopsony

Second regime Higher than At kink of supply curvemonopsony wagebut not higher thancompetitive wage

Third regime Higher than competitive wage At intersection whereminimum wageequals MRP

Source: ‘Monopsony’,Wikipedia,The Free Encyclopedia, 2005.

There is Pareto inefficiency evident in all three regimes de-noted by an excess supply of unemployed labour. The First Re-gime being synonymous with the description of the deadweightloss of a monopsony stated above.

We depict the Second Regime below:This action would change the supply curve and hence the


MC curve (Marginal labour cost). No labour will be hired belowthe minimum wage Wmin. At this given wage, the monopsonistcan now attract a fixed number of workers up to the kink in thesupply curve. Here Wmin is higher than the monopsonistic wagerate Wm. At this given wage the firm can now hire all the workersit wants to, up to the supply curve, so that in the relevant em-ployment range its marginal cost of labour becomes effectivelyconstant and equal to Wmin, as shown by the new black horizon-tal line MCmin. Wmin not only does not serve the profitmaximising interests of the monopsonist, but also leads to an ex-cess supply of labour between points A and B, which will remaininvoluntarily unemployed. This excess supply of labour indicatesPareto-inefficiency, even though all wage rates have beenrationalised to Wmin from a strictly egalitarian point of view.

In the third regime depicted below:At minimum wage rate Wmin, the monopsonist maximises

profits at the new intersection point A, choosing the employmentlevel Lmin, which is higher then monopsonistic level L. Beyondpoint A, however it would be unprofitable to hire additional workersfrom the monopsonist’s view point. There is an excess supply oflabour i.e. involuntary employment – equal to segment AB where

Fig. 7: Second regime: The minimum Wage Distributive Justice


there is clearly a deadweight loss to society, despite the minimumwage raising the level of employment from Lm to Lmin.

Minimum wage policy is a classic example where policy aimedat Distributive justice has resulted in a deadweight loss and wherethere is a clear trade-off.

FORMS OF GENDER DISCRIMINATION THAT ARE BOTHPARETO INEFFICIENT AND STRICTLY UNEGALITARIAN

This section aims to briefly identify forms of gender discrimina-tion that are both Pareto-inefficient and unequal. Strict egalitari-anism as an aspect of distributive justice dictates that all forms ofgender discrimination are undesirable, which is a paradox to theRawlsian ‘Difference Principle’ that allows for certain forms ofgender discrimination. In the description of such forms of genderdiscrimination, we view strict egalitarianism from the point thatall individuals in society should have equal power or equal av-enues for access to resource allocation mechanisms.

Historically defined gender constructs give rise to inequalitiesthat are exploitable within markets to achieve pareto-efficiency.Such constructs can however lead to inefficient market outcomes,in the following two situations a) when individuals do not havesufficient information to seek out such profitable or advantageous

Fig. 8: Third regime: The Minimum Wage, DistributiveJustice and Efficiency


opportunities. b) When they do not have sufficient control (oraccess) over commodities (including productive assets) to affectprofitable or advantageous opportunities.

Lack of Information AccessAccess to information is vital to individual and group economicinterests and for markets to function effectively. By this we mean,for example, information that would lead to an increase in liveli-hood options and productivity e.g. labour markets (wage rates,jobs available), credit markets (loan types, interest rate compari-sons).

An engendered perspective asserts that clear information ac-cess is beneficial for both sexes, except that it is further noticedthat women will tend to benefit more considering the historicalstructuring of their social networks. Women have socially tendedto have closely knit familial ties whereas men who are treated asprimary breadwinners have tended to extend their networks be-yond the family. The spread of information is constrained withina patriarchal structure.

The creation of incentives to resolve this socially inefficientoutcome is to create gender-sensitive focal points that will (a) pro-vide information for the individual and (b) encourage the forma-tion of informal social networks that may later evolve into socialnetworks such as self-help groups, women’s cooperatives and pro-duction associations.

Gender sensitive focal points of information (GSFPI’s) canflexibly act both as motivational providers as well as intermediar-ies of market information to the individual and individuals choos-ing to group into social networks. These could be incorporated inthe workings of existing mechanisms, which would lead to greaterlevels of efficiency such as Labour Exchanges, Panchayats and com-munity centres or new GSFPI’s through special booths in postoffices, railway stations, slums, public wards and points whereinformation is more likely to be received and spread. The under-lying principle of GSFPI’s is the provision and spread of valuableinformation to the individual or group in a motivational and simpleway.


Lack of Access to CreditThe above point bears a strong interlinkage to gender discrimina-tion and the lack of access to credit. There exist inherent ineffi-ciencies of state-led formal credit systems due to improper target-ing, where the poor are still excluded from the benefits of theprogramme at the cost of the non-poor, improper screening mecha-nisms of credit worthy borrowers and usage of loans that result inhigh transaction costs to the poor. The system of directed lendingalso leads to the creation of non-profit making assets due to poorrepayment of loans. Skewed ownership in land patterns and ageneral lack of collateral does not make things any easier.18 Womenstand on the lower rung of the credit ladder due to added ineffi-ciencies that have resulted from pre-defined social roles.

The importance of social networks cannot be underestimatedas societal motivators, and more importantly information provid-ers pose as collateral via the presence of a group. Loan repayments,for example, are easier to monitor via the surveillance mechanismsof a group, which acts as powerful social collateral for access tocredit markets. Network effects arise when taking into the ac-count the surveillance mechanism. The total value of the socialcollateral of the group is roughly proportional to the square of thenumber of individuals already using that social collateral to seekgreater access into credit markets. Hence an individual that addsto a group is able to make use of the social collateral of the entiregroup. A critical mass point would be reached when the surveil-lance mechanism fails due to there being too many members withina group.19

The issue of network effects and surveillance mechanisms op-erating within a social network or group is inherent in existingmicro-credit schemes. Chavan and Ramakumar (2002) state thatthese schemes attempt to bridge the gap between the public bank-ing network and women (amongst other socially disadvantagedgroups) via the Self-Help Group (SHG.). This policy consists ofthree variants. 1) Public banks either acted as a ‘self-help grouppromoting institutions’ (SHPI.), 2) Facilitating agencies such asNGOs or government agencies acted as mediators between SHGsand public banks or 3) those who managed the SHGs themselves


and behaved as credit providers with public banks providing creditto the facilitating agency. Innovative methods of lending, the ex-ploitation of a vast rural banking network, developed social net-works via micro-credit scheme brings the socially disadvantaged,including women in touch with credit markets, which is seen asan efficient outcome.20

Of course the question of efficiency depends on how well oiledthe mechanisms of micro-credit are. The utilisation of the publicbanking network for the supply of micro-credit implies account-ability in operations, that the interest on SHG loans does notexceed the ceiling fixed by the RBI for small loans (interest ratesare fixed to provide a margin to banks and NGOs), if there hasbeen any noticeable contribution to the improvement of skillsand technology adopted by SHG’s and if there has been a perva-sive spread of information towards this end. Also there is the ques-tion of whether the micro-credit scheme is gender-sensitive at all.21

Untapped Skill PotentialWomen tend to largely engage in the trade-off between marketwork and non-market work. This trade-off exists in degrees de-pending on the level of importance that social pressures give tothe role of non-market work. There exists the accompanying fac-tor of untapped skill potential where attributes and skills acquiredin non-market work are not recognised or partially recognised asskill that is both exploitable and marketable, which is thereforenot developed to its fullest potential.

A large part of the female workforce is present in industriesrequiring basic to intermediate skill, because they were seen ashaving natural given attributes such as dexterity, better concen-tration for longer hours, good visual responses to detail, compre-hension of intricate patterns and the ability to comprehend andassemble the sub-parts of a whole. These qualities reflect trainingthat has been acquired form non-market work like cooking, sew-ing etc. (Elson & Pearson, 1981).22

Skill development is hindered when many of the skills re-quired in women’s occupations are not reflected in job designa-tions ‘because they mirror domestic tasks which women perform


outside the workplace for free’ (Lim, L. 1996).23 The question ofskill development needs to be addressed, utilising the recognitionof existing skills as a starting point for training, instead of thelatter issue being exclusive (Chhachhi, 1999).24 From an efficiencypoint of view, this could allow skills to develop at full potentialand make them marketable across a given enterprise or trade.

Lack of Access to Productive Resources, Due to Discriminationin Private Property OwnershipBarriers to potential sources of productivity such as private prop-erty were clearly identified in previous versions of existent lawssuch as the Hindu Succession Act (1956) and the Hindu Succes-sion Act (Amendment) (2005). The gamut of religious laws onprivate property not only discriminate with respect to gender in asocially inefficient manner but are also discriminatory on egalitar-ian grounds.

Discrimination in access to private property denies womenthe right to seek better access to credit markets (requiring as theydo private property as collateral, the running of small home busi-nesses and where there are adverse generational effects on the pro-ductivity of offspring in situations where productivity is positivelycorrelated to access to private property.)

Many women’s rights activists and legal experts have arguedthat The Hindu Succession (Amendment) Bill 2005 has not beendrafted comprehensively. The Bill is analysed here from the per-spective of its inherent gender discrimination that was once so-cially inefficient.

The amended version of the Bill reduced the following ineffi-ciencies, which existed in the Hindu Succession Act (1956):

• The Mitakshara System of Joint family property where womenare guaranteed an equal share in the deceased Hindu malesnotional portion along with sons and other Class 1 heirs, butare not treated as independent coparceners like sons who bybirthright are entitled to an independent share in the jointfamily property, in addition to their shares in their father’sportion.25


• Women are not allowed to demand partition of their notionalshares if male heirs reside.26

• Sons can demand partition of the Mitakshara coparcenary whilewomen cannot.27

• A man can convert any part of his separate property into co-parcenary property, which can further reduce women’s inher-itance.28

But the Hindu Succession Act (Amendment) (2005) still con-tained an aspect that is Pareto inefficient and that was rectified inAugust of 2006. (CHECK)

Notably Section 4(2), exempted significant interests in agricultural landsuch as the devolution of tenancy rights, where states either follow theHindu Succession Act (1956) or do not specify the order of devolution oftenancy rights and in other states the order of devolution of tenancy rightsis gender discriminatory

Here primacy was given (as under the ancient Mitakshara system) tomale lineal descendants and women came very low in the order of heirs.Also, a woman got a limited estate and lost the land if she remarried (aswidow) or failed to cultivate it for a year or two.29

There are inequalities that still do exist and still await rectification:Section 30 of the Act gave a person unrestricted testamentary rights overhis/her property. In practice, the provision can be used to disinherit fe-male heirs. This section can and has been used to disinherit women.30 Onthe positive side, the amendments might increase the shares of daughterswho were unmarried when the amendments came into effect and in thelong run increase the shares of all daughters. It will also give daughtersdirect rights in some property, which the father cannot will away.

But the amendments will decrease the shares of other Class I femaleheirs, such as the man’s widow and mother, since the coparcenary share ofthe deceased male from whom they inherit will decline.31

CONCLUSIONThe above is a brief description underlining the importance of theinteraction of three aspects: normative measures, gender discrimi-nation and markets. We have seen in Section II, how gender dis-


crimination though distributively unjust and thereby unequal,may still lead to ‘efficient’ market outcomes, through the exampleof a wage discriminating monopsonist. We look at minimum wagepolicy in direct contrast as an application of distributive justice,to resolve gender discrimination that is Pareto efficient. What willbe seen is a trade-off of efficiency versus strict equity. Such a tradeoff throws light on how gender discrimination can best be re-solved depending on the kind of normative measure used.

In Section III, such a trade-off does not always occur. Situa-tions have been examined where gender discrimination leads tomarket failure and can be resolved both on egalitarian and socialefficiency grounds. Illustrations of gender sensitive barriers tomarket entry include 1) The lack of access to information wherewomen (amongst other socially disadvantaged groups) are far worseoff when it comes to being isolated from credit or labour marketsdistorted by historical gender constructs. 2). Non-market work rep-resents a hidden reservoir which is inadequately recognized as apotential starting point from which development in skills can leadto their marketability across a given trade or enterprise. 3) Finally,isolation from formal credit markets and lack of collateral alsoposes a serious barrier to credit access for women. This is againmainly on account of the inefficiencies that have resulted frompre-existing historically defined gender constructs. 4) The HinduSuccession Act (1956) and Hindu Succession Act (Amendment)(2005) are prime examples of legislation that barred women frompotential sources of productivity such as private property. Therestill exists an aspect of such legislation that continues to genderdiscriminate in a socially inefficient manner and also on egalitar-ian grounds. Daughters might still be included as coparceners atthe cost of the widow’s property share declining. This anomalywould disappear if the Mitakshara coparcenary is abolished alto-gether. All property would then go equally to class I heirs, of whichthe widow is one. Also, given a male bias, an implicit inequalityarises from the unrestricted right to will. A man can disinherit herby willing away private property to a person(s) of choice.

It is arguably the case that in situations where gender dis-crimination is socially efficient, normative concerns of distribu-


tive justice are more likely to make engendered theory and policyeffective. It is with a view to increasing this effectiveness that nor-mative principles need to be examined to reveal the nuances ofgender discrimination in a market framework.

NOTES1 See ‘Pareto efficiency’, Wikipedia, The Free Encyclopedia, 2005.2 See Julian Lamont and Edward N. Zalta, The Stanford Encyclopedia of

Philosophy (Fall Edition), 2003.3 See ‘Distributive Justice’, Wikipedia, The Free Encyclopedia, 2005.4 Ibid, P.25 See Stephen Smith, Labour Economics, UK, 20036 Ibid, P.967 See Hal Varian, Intermediate Microeconomics—A Modern Approach, USA,

19968 Ibid, P.4149 Ibid, P.414

10 Ibid, P.414-41511 Ibid, P.42612 Ibid, P.42613 Smith, op. cit., P.10014 See John Sloman, Economics, UK,1996.15 Ibid, P.26516 Ibid, P.26417 See Hal Varian (1996), ‘Differential Pricing & Efficiency’, First Monday,

Peer Review Journal on the Internet.18 See Pallavi Chavan and R. Ramakumar, ‘Micro Credit & Rural Poverty—

An Analysis of Empirical Evidence’, Economic & Political Weekly, 200219 See ‘Network Effect’, Wikipedia, The Free Encyclopedia, 2005.20 See Pallavi Chavan and R. Ramakumar, op. cit.: P.96321 Ibid, P.96322 See Diane Elson and Ruth Pearson, ‘Nimble Fingers make cheap workers:

an analysis of women’s employment in Third World export manufactur-ing’, Feminist Review,1981

23 See Lim Lin Lean, More and Better Jobs For Women: an action guide, Geneva,1996,

24 See Amrita Chachhi, Gender, Skill and Industrial Restructuring: The Elec-tronics Industry in India, Hague, 1999.

25 See Bina Agarwal ‘A Bill of Her Own’, Indian Express, Columns, 2004.


26 Ibid.27 Ibid28 Ibid29 See Kirti Singh, ’Amendments to the Hindu Succession Act – Are they

Enough to Bring About Gender Equality?’, Combat Law, Vol 4,Issue 1,2005

30 See Bina Agarwal, ‘Women didn’t receive rights without struggle’, IndianExpress, Columns, 2005

31 Ibid.

BIBLIOGRAPHYAgarwal, Bina (2004), ‘A Bill of Her Own?’, Indian Express, Columns.Agarwal, Bina (2005), ‘Women didn’t receive rights without struggle’, Indian

Express, Columns.Chachhi, A, (1999), Gender, Skill and Industrial Restructuring: The Electronics

Industry in India, Institute of Social Studies, The Hague.Chavan. Pallavi and R. Ramakumar, (2002), ‘Micro Credit & Rural Poverty –

An Analysis of Empirical Evidence’, Economic & Political Weekly.Elson, D. and Pearson, R. (1981), ‘Nimble Fingers make cheap workers: an

analysis of women’s employment in Third World export manufacturing’,Feminist Review 7.

Lamont, Julian and Edward N. Zalta (2003) ‘Distributive Justice’, The StanfordEncyclopedia of Philosophy (Fall Edition).

Lim Lin Lean, (1996), More and Better Jobs For Women: an action guide,Geneva:International Labour Organisation.

Singh, Kirti, (2005), ‘Amendments to the Hindu Succession Act – Are theyEnough to Bring About Gender Equality?’, Combat Law, Vol 4,Issue 1.

Sloman, John, (1996), Economics, Prentice Hall, Harvester Wheatsheaf, USA.Smith, Stephen, (2003), ‘Labour Economics’, Routledge, UKVarian, Hal,(1996), ‘Differential Pricing & Efficiency’, First Monday, Peer

Review Journal on the Internet.‘Distributive Justice’, Wikipedia, the Free Encyclopedia, (2005)URL= http://en.wikipedia.org/wiki/Distributive_justice.‘Network effect’, Wikipedia, The Free Encyclopedia (2005),URL= http://en.wikipedia.org/wiki/Network_effect‘Monopsony’, Wikipedia, The Free Encyclopedia (2005), URL=http://

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