February 21, 2014

When Women Rule, Nations Prosper

Women leaders boost the economies of fractious nations at much higher rates than their male counterparts.

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A mere 15 percent of parliamentary representatives around the world are women — a reflection that for all the benefits democracy may bestow upon nations, it has not yet fully delivered on social equity. There are hints of change: women in top national leadership positions — president or prime minister — have more than quadrupled between 1950 and 2004, from four to 18. Recently, women have been elected in every corner of the globe, including, Chile, Germany, Liberia, and South Korea.

Many of these leaders were elected amidst turbulent backdrops: Ellen Johnson Sirleaf was elected as the president of Liberia in 2005, on the heels of its second civil war, for example, while in 2013 Park Geun-hye of South Korea ran on a platform that promoted peace-building with North Korea. Just last month, Catherine Samba-Panza was chosen to lead, on an interim basis, the Central African Republic, which is in the midst of a civil war.

Professor Katherine Phillips worked with Susan K. Perkins and Nicholas A. Pearce, both of Northwestern University, to look more closely at global trends in female leadership since 1950, including evidence that having a female rather than a male leader of ethnically diverse nations leads to different outcomes. “A nation’s leaders have a lot of power to shape policy, including policy that impacts economic growth,” Phillips says. “So we wanted to know: do women leaders have a different impact than their male counterparts? And are there some circumstances under which women might be more effective leaders than men?”

The focus on economic outcomes is important on its own, but also because social unrest often goes hand in hand with economic woes, and economists have shown that nations with higher ethnic fractionalization (EF) — a measure of the likelihood that a fellow citizen is from another ethnicity — experience more inequality and conflict. That makes the challenge of governing particularly complex since leaders must navigate and balance conflicts of interest between ethnic groups, including those groups that are not as well-represented in the government. And nations with a lot of ethnic diversity have historically experienced lower GDP growth: the impact of going from no diversity to full diversity is a loss of 2 percent GDP growth.

To learn the precise relationship between economic performance and national leaders, the researchers compared data for national leaders in 139 nations from 1950 to 2004 with annual Penn World Table GDP growth data. They included Gapminder measures that signal GDP health, including infrastructure investment, post-secondary schooling, and rule of law — how strong a nation’s most important institutions are.

Phillips and her co-researchers found that when troubled nations elect women to the key national leadership office their economies experience a significant rise in GDP compared with their male counterparts. (GDP was measured the year after election to ensure same-year GDP changes — which are more likely attributable to the policies of previous leaders — weren’t attributed to new leaders.) For the most ethnically diverse nations —those with high EF — having a woman in the top national leadership position was correlated with a 6.9 percent greater increase in GDP growth in comparison to nations with a male leader.

The female stereotype of motherly nurturing and compassion may not immediately elicit an image of masterful leadership. So why might people choose a woman to lead when a nation is facing enormous strife, and why do these leaders perform better under these trying conditions than their male counterparts? The team looked to other research to consider possible explanations, much of which tells a story of evolutionary psychology. Studies show women leaders tend to have a more participatory, democratic style than men; others have shown that when people perceive a threat and need to change their environment, they prefer female leaders, choosing men to lead during times of stability. In short, women may simply be seen as better at managing difficult situations that require more inclusionary or cooperative approaches.

Phillips and her co-researchers’ findings parallel those found in private sector where, mirroring their parliamentary colleagues around the world, women account for just about 15 percent of upper management in firms. There, too, the presence of women in the upper ranks is associated with better performance: firms with a greater percentage of women at the highest level of management are more innovative and more profitable. Taken together, these findings point to the need for policies that promote equity in leadership, and suggest such efforts could produce better economic outcomes while stimulating the inclusion of other under-represented groups. “Women are perceived to have qualities needed to improve the lot for everybody,” Phillips says. “And they deliver.” 

Katherine W. Phillips is the Paul Calello Professor of Leadership and Ethics in the Management Division at Columbia Business School.

Read the Research

Perkins, Susan E., Katherine W. Phillips, and Nicholas A. Pearce. “Ethnic Diversity, Gender, and National Leaders.” Journal of International Affairs 67, no. 1: 85-104.