Does Female Empowerment Promote Economic Development?

Empirical evidence suggests that money in the hands of mothers (as opposed to fathers) increases expenditures on children. Does this imply that targeting transfers to women promotes economic development? In this paper, we develop a noncooperative model of household decision making to answer this question. We show that when women have lower wages than men, they may spend more on children, even when women and men have the same preferences. However, this does not necessarily mean that giving money to women is a good development policy. We show that depending on the nature of the production function, targeting transfers to women may be beneficial or harmful to growth. In particular, such transfers are more likely to be beneficial when human capital, rather than physical capital or land, is the most important factor of production. We also provide empirical evidence supportive of our mechanism: In Mexican PROGRESA data, transfers to women lead to an increase in spending on children, but a decline in the savings rate