Are women more disadvantaged than men in the informal sector?

A recent study by La Porta and Shleifer (2008) estimates that for the world as a whole, between 23 and 35 percent of all economic activity occurs in the informal or the unregistered sector; for the poorest countries the figure is even higher—estimates range between 29 and 57 percent. We also have anecdotal evidence that women entrepreneurs and workers constitute a much higher proportion of the informal than the formal sector. Together, these two observations mean that the informal sector is an important and exciting place for those interested in gender-related development issues.

The catch, of course, is a perennial lack of reliable data on the informal sector. Recent efforts at the Enterprise Surveys go some way toward addressing this problem. Surveys of informal firms have been completed for six countries in Africa (Burkina Faso, Cameroon, Cape Verde, Cote d’Ivoire, Madagascar and Mauritius), with three more on the continent currently in the pipeline. These data allow us to see how informal businesses owned or run by male vs. female entrepreneurs differ in their characteristics, performance, obstacles to doing business and the way business is conducted.

To provide one example of how these data can be used for gender-related studies, an analysis I recently published (Economics Bulletin, 2010) confirms the commonly held view that female-owned informal businesses are much smaller in size (as measured by sales or employment) than male-owned businesses. This is important, given that firm size is often a good predictor of, for example, firm-efficiency, access to finance and the potential benefits from registering. Previous work on firm-size and gender relationship is largely restricted to the formal or registered sector and the developed countries.

Other interesting questions that these data could shed light on include whether female-owned businesses are less efficient than male-owned businesses (as suggested in the broader literature); do women prefer to work from home rather than outside compared with men and why so; do the potential benefits from registering and the obstacles to registering vary across male and female-owned businesses. Answering these questions would get us a few steps closer to addressing the key question that I posed in the title of this post.