Promoting gender equality—lessons from India

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A central driver of economic growth is the increased role of women. This comes in many forms: increased female labor force participation, reduced discrimination and wage differentials that encourage greater effort, and improved advancement practices that promote talented women into leadership and managerial roles. Indeed, empowering half of the potential workforce will have significant economic benefits that goes beyond promoting just gender equality. 
 
Yet, gender disparities in women’s economic participation have remained deep and persistent. What explains these gender disparities? Is it poor infrastructure, limited education, or the composition of the labor force and industries? Or is it deficiencies in social and business networks and a low share of incumbent female entrepreneurs? We examined these questions using plant level data in India with a focus on the spatial determinants of female entrepreneurship in the manufacturing and services sectors.  
 
Which industries have attracted more women? Within the manufacturing sector, female ownership shares are highest and typically exceed 50 percent in industries related to chemicals and chemical products, tobacco products, and paper and paper products. At the opposite end, female ownership shares are 2 percent or less in industries related to computers, motor vehicles, fabricated metal products, and machinery and equipment. In the service sector, female ownership rates in major cities tend to be higher than overall state averages. Among service industries, female ownership shares exceed 30 percent in industries related to sanitation and education. Industries related to research and development, water transport, and land transport have the lowest female ownership rates, at 1 percent or less. The states with the highest female service sector ownership rates are Kerala, Tamil Nadu, and Andhra Pradesh, with average female ownership shares exceeding 12 percent. The lowest female ownership rates are in Rajasthan, Bihar, Orissa, and Uttar Pradesh, each with 6 percent or less.
 
What drives the gender balance of new enterprises? Empirical results suggest that a district/industry with more incumbent female employment has a greater female entry share. Among district-level traits, a higher female-to-male ratio, an age profile emphasizing working-age population, and better quality infrastructure appear important.
 
The relationship between infrastructure and female entry share is perhaps the most relevant for policy makers. While basic infrastructure services like electricity are essential for all businesses, new entrants and the informal sector can be particularly dependent upon local infrastructure (established firms are better able to provision their own electricity if necessary). Inadequate infrastructure also affects women more than men, because women are often responsible for a larger share of, and often more time consuming, household activities. Interestingly, empirical findings suggest that access to major cities does not influence the gender balance of entrepreneurship, but infrastructure access within a district does. In particular, transport infrastructure and paved roads within villages play an important role. Travel in India can be restrictive and unpredictable, and women face greater constraints in geographic mobility imposed by safety concerns and social norms. In addition, better electricity and water access may reduce the burden of women in providing essential household inputs for their families, and allow for more time to be directed toward entrepreneurial activities.
 
What about agglomeration effects? The agglomeration metrics suggest that female connections in labor markets and local buyer/seller (input-output) markets contribute to a higher entry share. Proximity to customers and suppliers reduces transportation costs and thereby increases productivity. These results support the conclusion that female entrepreneurship in India follows from incumbent female-owned businesses in a district/industry that encourage subsequent entry. The strength of local input-output conditions are important, and their effects appear to be driven primarily by the presence of other local female-owned businesses.
 
What should policy makers do? Economic growth and development depend upon successfully utilization of the entire workforce, both male and female. Despite its recent economic advances, India’s gender balance in economic participation and entrepreneurship remains among the lowest in the world. To encourage more equitable economic participation and growth, better access to education and infrastructure is needed. Due to the nature of household responsibilities, inadequate infrastructure particularly affects women. The lack of specific transport infrastructure and paved roads within villages is a bottleneck, given the constraints in geographic mobility imposed by safety and social norms. Investment in local transport infrastructure may thus directly alleviate a major constraint to female entrepreneurs in accessing markets.
 
There is also strong evidence of agglomeration economies in both manufacturing and services. Higher female ownership among incumbent businesses within a district/industry leads to a greater share of subsequent female entrepreneurs. Moreover, higher female ownership of local businesses in related industries (for example, similar labor needs, input-output markets) predict greater relative female entry rates, even after taking into account the particular district/industry conditions. Promoting gender networks can directly stimulate female entrepreneurship. However, more research is needed to better understand how gender networks influence aggregate efficiency.