Mind The (Profit) Gap: Why Are Female Enterprise Owners Earning Less than Men?

Abstract

We explore potential causes for the well-documented profit gap between male- and female-owned microenterprises in low-income countries. We use rich data from an ongoing field project in Ghana's garment making sector, and our study sample consists of all garment making firms in a midsize district capital. Even within the same industry, male-owned firms earn nearly twice as much profit as female-owned firms. Furthermore, we find the large and persistent gender difference in profits cannot be explained by our extensive firm- and owner-level characteristics. We conclude that factors outside of individual firm or firm-owner characteristics are likely to be at play.

Misallocation across Establishment Gender

“…Much of this work focuses on micro-scale establishments, often informal and with few paid employees, in specific industries to identify differences across gender in observables such as revenue and investment. 5 For instance, Hardy and Kagy (2018) show that micro-scale female establishments earn less profit than males in a garment sector in Ghana, and de Mel et al (2009) show that returns are lower for female grant recipients in Sri Lanka potentially due to less control over household bargaining. My paper connects to this literature by measuring misallocation among formal establishments from a macro approach, providing an additional view of the barriers to production by gender among a more skilled set of the population, and for an expansive set of countries.…”

Migration and household finances: How a different framing can improve thinking about migration

“…They can seek the steady pay of a formal wage job, but few are available. 1 They can start a business, but that revenue can also be volatile and most microenterprises earn small or negative profits (de Mel et al, 2009;Rutherford & Chatterjee, 2019;Breza & Kinnan, 2018;Hardy & Kagy, 2018). They can invest in other assets, like livestock or bank accounts (Barrett, Bellemare, & Osterloh, 2006), but these can be costly, difficult and risky (Narayan, Patel, Schafft, Rademacher, & Koch-Schulte, 2000;Dupas, Karlan, Robinson, & Ubfal, 2018).…”

Rent-Sharing, Gender Wage Inequality and Female-Led Firms

“…Thirdly, by examining how demand shocks affect intra-firm gender wage gap, I relate to the gender wage gap literature, specifically with studies that investigate the relationship between gender wage inequality and firm-specific pay policies (Card et al (2016), Black and Strahan (2001), Goldin et al (2017)). Finally, my paper contributes to the expanding literature on how female leadership affects outcomes of firms (Hardy and Kagy (2018), Bertrand et al (2014), Flabbi et al (2016), Gagliarducci et al (2015), Cardoso and Winter-Ebmer (2010)). It relates closely to Hardy and Kagy (2018), who studied the effect of demand shocks on the gender profit gap between male and female-owned firms.…”

“…Finally, my paper contributes to the expanding literature on how female leadership affects outcomes of firms (Hardy and Kagy (2018), Bertrand et al (2014), Flabbi et al (2016), Gagliarducci et al (2015), Cardoso and Winter-Ebmer (2010)). It relates closely to Hardy and Kagy (2018), who studied the effect of demand shocks on the gender profit gap between male and female-owned firms. Since both Cardoso and Winter-Ebmer (2010) and Flabbi et al (2016) find effects of female leadership on wages, I examine the heterogeneous effect of demand-shocks on wages by ownership of firms.…”

“…Rent-sharing can affect gender wage inequality if women obtain a smaller share of the surplus in comparison to men (Black and Strahan, 2001;Card et al, 2018;Nekby, 2003). Furthermore, female leadership might affect firm performance, wages and ultimately gender wage gap (Cardoso and Winter-Ebmer, 2010;Bertrand et al, 2014;Flabbi et al, 2016;Gagliarducci et al, 2015;Hardy and Kagy, 2018). Differences in wages by firm ownership might arise if female executives are better equipped at interpreting signals of productivity from female workers, for example.…”