How gender equality boosts the economy

With protectionism and industrial policy returning to advanced economies, and with geopolitical tensions on the rise, this is an inauspicious moment for trade-led growth strategies.

- Pinelopi Koujianou Goldberg

Since future growth will increasingly depend on sound domestic policies, lowand middle-income countries should focus on ensuring that existing resources are fully and efficiently deployed. And no resource is more valuable than human capital.

While economists and policymakers have long recognised the accumulation of human capital — particularly through investments in education — as a driver of growth and development, they have devoted far less attention to the efficient allocation of existing human capital.

Eliminating, or at least reducing, misallocations of talent should therefore be a top priority. A growing body of economic research has shown that even in advanced economies such as the United States, reducing talent misallocation can have meaningful economic effects.

For example, an influential paper published a few years ago attributed 20-40% of US per capita market output growth from 1960-2010 to improvement in talent allocation. This additional growth was achieved by reducing labour market discrimination against women and black men, and by lowering the barriers these groups faced in developing human capital.