Are businesses run by women less productive than businesses run by men? If we perform a very simple comparison of the average productivity of female and male-owned enterprises, we might answer “yes”. But if we look a bit more closely at the data, a large part of this gap is explained by the fact that women and men are doing different things. If you compare women and men in the same sectors and in similar types of enterprises, the gap shrinks dramatically. Where you work is more important than gender in accounting for the observed productivity gap.
Using data on over 9000 registered enterprises from 32 countries in Sub-Saharan Africa, we see a productivity gap of 6 percent. However, controlling for sector, size and capital intensity, the gap disappears (see chart 1). If we include unregistered firms in the analysis, the unconditional productivity gap widens, as women are disproportionately in the informal sector where productivity is even lower. Nevertheless, the same pattern holds: there is little gender performance gap between similar enterprises.
Chart 1: The Gender Gap in Average Firm Labor
Controlling for enterprise characteristics removes the gender gap in productivity (registered firms in 32 Sub-Saharan African countries)
Source: Enterprising Women: Expanding Opportunities in Africa, Hallward-Driemeier (forthcoming)
Once comparing like with like, the finding of no or few significant differences between female and male entrepreneurs in performance is encouraging. It confirms that Sub-Saharan Africa has considerable hidden growth potential in its women, and that tapping that potential—including improving women’s choices of where to be active economically—can make a real contribution to the region’s growth.
A similar story emerges when we look at the obstacles faced by men’s and women’s businesses. Once the characteristics of the enterprise are controlled for, gender differences in obstacles are generally not significant. Access to electricity is a constraint, particularly for smaller and medium firms, and issues of skills and regulations for larger firms, regardless of the gender of the entrepreneur. There are, however, two exceptions that have a direct gender angle. First, women report having a harder time accessing credit. This is not only due to their running smaller firms (which itself may be a result of this constraint), women often have less access to collateral. This is correlated with a country’s gender gaps in formal property rights and practical constraints in accessing justice (this topic will be elaborated in an upcoming blog). Second, women often face greater difficulties in dealing with government authorities. They may be expected to pay higher amounts to get things done, may be less likely to get things done even having paid – and the ‘payment’ sought may not only be monetary. Indeed, over a quarter of respondents, male and female, reported that they had heard of sexual favors being requested to obtain licenses, receive credit or in dealing with the tax authorities.
If where you work rather than gender is associated with performance and the main constraints to firm growth, policy makers need to understand why the observed gender patterns of entrepreneurship persist. One of the most significant predictors of whether an entrepreneur joins the formal or informal sector and the size of their enterprises is education. What we find is that across sectors, there are large gaps in education, but few gender education gaps within a sector. Women and men in the formal sector have very similar educational backgrounds, likewise in the informal sector (see Chart 2). However, where gender comes in is that women have fewer years of education, helping explain why fewer women are in the formal sector.
Chart 2: Education varies more by formal/informal sector than by gender
Source: Gajigo and Hallward-Driemeier 2010, Survey of New Enterprises in Cote d’Ivoire, Kenya, Nigeria and Senegal.
To expand women’s opportunities, more women need to be able to shift where they work. Tackling underlying disparities in access to human capital and assets are key to these efforts. With the same backgrounds, women are able to run the same types of firms as men with equal results.