Unpacking the Gender Profit Gap: Evidence from Micro-businesses in India

• In Event: 3149 - Constructing Gender

Abstract

Large gender differences in earnings prevail worldwide in almost all occupations, and entrepreneurship is no exception. Women's businesses are typically less productive, but also smaller and less capital-intensive than men's. Despite the vast literature reporting the gender gap in profitability, its causes are not well understood. Our study examines the role of organizational characteristics on gender disparities in profitability. We study small-scale produce businesses in India. A survey conducted in Summer 2017 confirms that women’s businesses are both less profitable and smaller than men's in this context: women make 25\% less profit than men. Using a large-scale field experiment, we test whether giving men and women the same business closes the gap in profitability. We set up our own market stalls, to which we randomly assign male and female vendors. We thus exogenously vary gender, holding the business constant. Preliminary evidence suggests that with the exact same business characteristics, the gender gap is reduced but persists, as women still make about 16\% less profit than men. We propose to scale up our experiment and augment it to test other mechanisms.

Authors

• Solene Mathilde Delecourt, Stanford University

• Odyssia Ng, Stanford University