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DECEMBER 9, 2002

Economic Trends
By Gene Koretz

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Are Women Less Competitive?

Narrowing the Digital Divide

A Stress Test for the Dollar

Chart: War Scares Investors

Are Women Less Competitive?

Although women have made huge strides in catching up with men in the workplace, a gender gap persists both in wages and levels of advancement. Commonly cited explanations for this gap range from charges of sex discrimination to claims that women are more sensitive than men to work-family conflicts and thus less inclined to make sacrifices for their careers.

Now, however, two new studies by economists Uri Gneezy of the University of Chicago and Aldo Rustichini of the University of Minnesota suggest that another factor may be at work: a deeply ingrained difference in the way men and women react to competition that manifests itself even at an early age.

The first study focused on short races run by some 140 9- and 10-year-old boys and girls in a physical education class. At that age, there was no significant difference between the average speeds of boys and girls when each child ran the course alone. But when pairs of children with similar initial speeds ran the race again, things changed. Boys' speeds increased appreciably when running against either a boy or a girl, but more so when paired with a girl. Girls showed no increase when running against a boy, and even ran a bit more slowly when paired with a girl.

The second study, by Gneezy, Rustichini, and Muriel Niederle of Stanford University, involved several hundred students at an elite Israeli technical university. Groups of six students were paid to solve simple maze problems on a computer. In some groups, subjects were paid 50 cents for each problem they solved during the experiment. In others, only the person solving the most problems got rewarded--but at the rate of $3 for each maze solved.

Regardless of the sexual makeup of the groups, men and women, on average, did equally well when students were paid for their own performance. But when only the top student was paid, average male performance rose sharply--by about 50%--while female performance remained the same.

The authors conclude that females tend to be far less responsive to competition than males--a tendency with important implications for women and business. It may hurt women in highly competitive labor markets, for example, and hamper efficient job placement--especially for positions in which competitiveness is not a useful trait.

That's something companies with highly competitive atmospheres may need to consider, says Rustichini. If they don't, the results could be "both a subtle bias against women and, in many cases, foregone worker productivity."

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Narrowing the Digital Divide

In 1998, the federal government launched an ambitious program to narrow the so-called digital divide between poor and middle-class households. To promote computer and Internet use by disadvantaged students, it offered subsidies of up to $2.2 billion a year to public schools for Web and related communications technology.

Are the subsidies, which range from 20% for affluent schools to 90% for the poorest, succeeding? In a new study based on California data, University of Chicago economists Austan Goolsbee and Jonathan Guryan respond with a qualified "yes." Fears that much of the money would go to richer schools, which would use the extra cash to replace Internet spending already under way, proved unfounded, they report.

It turns out that poor schools with mostly black and Hispanic students got the lion's share of $937 million dispensed to California from 1998 to 2000, and their access to the Web rose so rapidly that by 2000 some boasted more Internet-connected classrooms per teacher than rich schools. The authors estimate that California had 66% more Internet-connected classrooms in 2000 than it would have had without subsidies.

Less reassuring is the researchers' evaluation of the impact on classroom performance. Using math, reading, and science test scores, they find no evidence that the Internet investment has improved student achievement.

The caveat is that the expansion of Web usage in poor schools is very recent and many teachers still feel uncomfortable using computers. Over time, Web access may yet prove effective in enhancing student learning.

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A Stress Test for the Dollar

Don't be surprised if the dollar loses a lot more steam. Although its recent weakness has been attributed to a gap between U.S. and European interest rates, Joseph Quinlan of Morgan Stanley thinks it also reflects the looming threat of a war with Iraq.

He points out that Iraq's invasion of Kuwait in August, 1990, helped trigger a six-month, $10.5 billion sell-off of U.S. equities by anxious foreign investors. Indeed, foreign net purchases of all U.S. securities, including corporate debt and Treasuries, swung from $9.2 billion in July to a decline of $3.9 billion in October. Over the same period, the dollar dropped 7% against major currencies.

Foreigners sold more U.S. equities and bonds when the Persian Gulf War began in January, 1991, though they did seek shelter in Treasuries. The dollar hit a low point in February. But after a ceasefire on Feb. 28, foreign interest in U.S. stocks and bonds revived, and the dollar rose 5% in March, bringing it back to its August, 1990, level.

Quinlan notes that America's current-account deficit is nearly 5% of gross domestic product today, vs. just 1.9% in 1990. And foreign holdings of U.S. securities are now far higher. Further, even a quick military victory in Iraq would be likely to entail a long-term U.S. presence there. Thus, he says, the impact of a war on the dollar and the U.S. stock and bond markets could be sharper and more prolonged than many experts expect.


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