Abstract
Despite the rapid rise of women’s education and the fall of their fertility rates in the Middle East and North Africa (MENA), female labor force participation (FLFP) rates remain low. This paper argues that oil and gas rents and Islamic family law jointly matter. Controlling for country and year fixed-effects in a long panel dataset, it shows that per capita oil and gas rents reduce FLFP rates in countries with Islamic family law more than others. The results are robust to econometric methodology and to controlling for the interaction of rents and all other time-constant factors that are common across the MENA region, such as culture, social norms, and institutions. Moreover, the results cannot be replicated by substituting historical plough use, a strong predictor of gender discrimination, in place of Islamic family law. Policy implications are discussed.
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Notes
Ross (2008) describes these as well.
This is because jobs in the export-oriented manufacturing sector, such as in textile and electronics factories, do not need physical strength or much education, but require precision and smaller hands.
Dutch disease refers to the negative impacts of a significant influx of foreign currency into an economy because of, for instance, discovery of natural resources or increase in their prices. The influx appreciates the domestic currency and this in turn makes the exports expensive and the imports cheap. Therefore, the domestic producers in the tradable sector lose competitiveness in the global and domestic markets and falter. The non-tradable sector, however, flourishes as the country became richer due to the influx and demand has increased. Since the industrial sector (manufacturing) is a tradable sector, the influx of foreign currency leads to de-industrialization. This phenomenon is called the Dutch disease after the Economist magazine coined the term in 1977 to refer to the economic maladies that happened following the discovery of vast natural gas reserves in the North Sea of the Netherlands in 1959.
The non-tradable sector may not be able to compensate for this loss of female jobs in the tradable sector, although it becomes larger as a result of Dutch disease. This is because the non-tradable sector in a developing economy mostly consists of construction and services such as retail, which offer few jobs for women. Construction is a male-dominated sector as it requires physical strength and services, such as retail, are usually small shops with one employee who is the male owner.
See the previous note.
This is true if female and male labor are substitutes. For a detailed discussion of income and substitution effects of wages, and non-labor income, see Killingsworth and Heckman (1987).
For example, in Iran, the government has recently transformed the large subsidies of energy and basic food into lump-sum monthly transfers to households.
The legalistic nature of Islam is attributed to the fact that it had to govern soon after its introduction. Therefore, it needed to have laws to regulate the interactions of the pious in the society. Few religions, in the world, had such chance to be in government early in their formation.
Sharia Courts are abolished in 1956 and inheritance law is among a few laws that remain based on Islamic law.
Similar to the arguments presented here about family law affecting economic behavior, Kuran (2004) and Kuran (2010) explain that Islamic business and contract law though sophisticated and fair was one of the main causes of divergence of the Middle East economies from those of the west in the modern era.
For further information about data see Ross (2008). The data is available for download at: http://dvn.iq.harvard.edu/dvn/dv/mlross/faces/study/StudyPage.xhtml?globalId=hdl:1902.1/14307.
It has several advantages over other measures. These advantages are discussed in Ross (2008).
In fact, only non-linear results are significant.
Collected by the International Labor Organization and released by World Development Indicators.
Data on Islamic family law is from the project “Islamic Family Law: Possibilities of Reform Through Internal Initiative” at the Emory Law School, project director: Dr. Abdullahi A. An-Na’im (http://aannaim.law.emory.edu/ifl/index2.html).
If, instead of the Islamic family law index, one uses the share of Muslim population in every country of the world in the regressions depicted in Table 5, she finds that the coefficient of the interaction of share of Muslims and rents becomes insignificant when one controls for the interaction of MENA dummy and rents. This provides further support for the special effect of Islamic family law. Another issue with using share of Muslim population in the regressions is that it assumes Islam as a unique entity that applies to every individual around the world similarly.
Saudi Arabia may be an outlier and affect the results significantly. But, none of the results in this study change when one excludes Saudi Arabia from the sample.
In addition to the Hartwick’s rule, a major and easier to implement policy recommendation is to regulate the amount of rent that enters the economy by setting up a stabilization fund. The goal is to isolate the economy from the shocks, created by the volatility in the oil and gas market, by allowing only a fixed amount of rent to go into the economy annually, regardless of the price of oil. Whenever the oil prices are high, the extra rent will be saved in the stabilization fund and when the oil markets crash, money is withdrawn from this fund. This policy immunes the economy from the many booms and busts in the oil markets and reduces uncertainty about the future.
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Acknowledgment
The author wishes to sincerely thank the editor and the anonymous reviewer for their helpful comments. Special thanks goes to John Marthinsen and Jeffery B. Nugent for reviewing an earlier version of this paper. Funding for this study was generously provided by the Glavin Council of Chairs at Babson College. All errors remain mine.
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Majbouri, M. Oil, Laws, and Female Labor Force Participation. Int Adv Econ Res 23, 91–106 (2017). https://doi.org/10.1007/s11294-016-9621-9
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DOI: https://doi.org/10.1007/s11294-016-9621-9