11 May 2012

Gay rights and economic growth

Why are we obsessing with gay rights in the middle of an economic crisis?

Because gay rights are human rights. And if you really need a reason beyond that, Daron Acemoglu lays out in detail how the "rights revolution" over the last century has driven technological innovation that has delivered economic growth.

Alex Tabarraok highlights some more recent evidence that also supports this view (one of the authors, Charles Jones, literally wrote the book on economic growth);
Public and private discrimination diminish a person’s ability to individuate and develop, an ability that drives innovation and growth in the artistic, economic and scientific realms. In India the caste system binds many people to the lives of their ancestors regardless of desire, talent or will. In parts of the world half the population is subjugated and bound to a limited vision of their life, a vision which is not of their own making. Similar if less extreme forces have limited women and blacks in the United States. 
In a pathbreaking paper, The Allocation of Talent and U.S. Economic Growth, Jones, Hsieh, Hurst, and Klenow connect a micro allocation model to a macro growth model to estimate that the lifting of much discrimination in the United States since 1960 has had a large effect on economic growth: 
In 1960, 94 percent of doctors were white men, as were 96 percent of lawyers and 86 percent of managers. By 2008, these numbers had fallen to 63, 61, and 57 percent, respectively. Given that innate talent for these professions is unlikely to differ between men and women or between blacks and whites, the allocation of talent in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper estimates the contribution to U.S. economic growth from the changing occupational allocation of white women, black men, and black women between 1960 and 2008. We find that the contribution is significant: 17 to 20 percent of growth over this period might be explained simply by the improved allocation of talent within the United States.
Up to a fifth of growth due simply to getting rid of pointless discrimination. Most of these economic opportunities have now been taken in the liberal west, but there are potentially huge economic gains across the developing world. How much is homophobia hurting African economies?


Matt said...

Mmm - I see what you did there, but not convinced, for a number of reasons:

1) In the US, these were not just inequities in jobs, they were inequities in human capital accumulation - I'm not sure that homophobia in Africa is preventing homosexuals from acquiring an education.

2) The `simple' in "simply getting rid of pointless discrimination" doesn't really acknowledge how incredibly difficult it was to make gains in these areas. It took decades of *endogenously* driven social change. Emphasis on the endogenous part.

3). the Jones paper focuses on people who can be easily discriminated against. While discrimination against homosexuals in the US (and Africa) is horrible and it would be wonderful if it all just went away, it's not clear that it's really preventing anyone from sorting into the jobs they need. It's easy to deny a job to a woman or an ethnic minority, but not quite as easy to determine someone sexual preferences, no?

4). You're also ignoring the implicit trade-off at hand when Western donors (assuming that is the "we" at the start) withhold aid or other forms of assistance because of beliefs deeply-held by the recipient country. I'm not saying the trade off isn't worth it (nor am I saying that it is), but these trade-offs need to be made clear. 

5). Finally, even with the past decade of growth, most SSA countries are not on a clear path of development, one that will take them. The marginal gains in the Jones paper are for an economy already chugging along - already on a growth path. Are they necessarily going to accrue for countries that have yet to find their way onto this path?

rovingbandit said...

1 - Yeah ok its probably a bit of a stretch. The India caste issue and gender issues are probably more important quantitatively. 

3 - There is though probably a case to be made about general openness and diversity encouraging innovation. There is for instance the recent paper suggesting that there is a small "diversity bonus" for London firms: http://eprints.lse.ac.uk/33579/

2/4 -I'm not sure I do support withholding aid, I don't think that is likely to be very persuasive, but I do think we should be engaging and trying to be persuasive. 

5 - Those gains aren't that marginal... but point taken. 

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