Accounting for the Gender Profit Gap

In countries across the world, women earn less than men. This is true not only for wage-paying jobs, but also for the earnings of micro and small businesses, which play a prominent role in most economies. Women-led businesses are less profitable than their male counterparts, have fewer employees, and are less likely to grow.

These findings have motivated a stream of research that seeks to explain why these gender differences exist and persist, and how we might begin to narrow them. Do women cluster in less profitable industries? Do other demands on their time, such as unequal care work, detract from their focus on the business? Does intra-household bargaining lead to inefficiencies in how capital is invested? How much of the gap is based on women's preferences versus constraints on women's choices? Can mobile technology provide a level of privacy that shields capital from misallocation? Can other characteristics of the firm or its owner explain the disparity, or do we need to look to the wider social and political environment, to the degree of state capacity to enforce contracts or the prevalence of violence in resolving business disputes?

We discuss what we have learned form research and experience that can help policymakers, financial service providers, and other organizations better meet the needs of women, and close gender gaps in small firms.

Featuring Nava Ashraf, Morgan Hardy, Rachael Pierotti, and Tatiana Rincón.

Moderated by Tim Ogden, FAI.