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? Not necessarily. We consider a noncooperative model of the household where a gender wage gap leads to endogenous household specialization. As a result, women indeed spend more on children and invest more in human capital. Yet, depending on the nature of the production function, targeting transfers to women may be beneficial or harmful to growth. Transfers to women are more likely to be beneficial when human capital, rather than physical capital or land, is the most important factor of production. We 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.