New publication on the nexus between gender bias and total factor productivity. A work with I. Bournakis and V. Motta

Abstract

The paper investigates the gender-driven disparities in total factor productivity (TFP) between women-owned enterprises (WOEs) and male-owned enterprises (MOEs) across 30 developing countries. Utilizing firm-level data from the World Bank Enterprise Surveys, the study addresses biases in previous gender literature by employing a semi-parametric technique to more accurately measure TFP. The results reveal a significant TFP gap, with WOEs being 5.5% to 6.7% less productive than MOEs, even after controlling for key firm characteristics like age, innovation, human capital, and ownership status. The study attributes this productivity disparity primarily to financial obstacles faced by WOEs, which hinder their ability to innovate and capitalize on opportunities. The lack of access to credit leads to a misallocation of capital, excluding equally efficient women entrepreneurs from financial resources that could stimulate productivity. Contrary to some assumptions, the study finds no evidence that WOEs underperform in sectors with high financial dependence, suggesting that WOEs are not inherently inefficient in their use of capital. Our findings provide causal evidence as we control for selectivity bias in the TFP-WOEs nexus by identifying exogenously the factors that affect financial constraints and innovation.

Policy implications

This study emphasizes significant opportunities for impactful policy interventions. The exclusion of women entrepreneurs from access to finance leads to aggregate capital misallocation, which can hinder overall productivity growth. To address this issue, policymakers should prioritize creating a more equitable environment for female entrepreneurs through a two-pronged strategy.

First, institutional frameworks must be strengthened to guarantee women’s legal rights to property ownership and ensure fair access to credit from financial institutions. Second, targeted policy measures should facilitate financing for women-owned and women-managed enterprises (WOEs and WMEs). Initiatives such as low-collateral loans specifically designed for female entrepreneurs can play a crucial role. In addition, training programs aimed at enhancing financial literacy and digital skills can empower women entrepreneurs, improving their confidence in navigating financial systems.

On the innovation front, policies should aim to help women-led firms overcome financial barriers to innovation. While general innovation policies benefit all firms, women-led enterprises stand to gain disproportionately from grants, subsidies, and tax incentives designed to encourage innovation. Such programs should explicitly prioritize female entrepreneurship, with a particular focus on supporting women entrepreneurs in developing countries.