In this paper, the authors develop a framework for quantifying barriers to labor force participation (LFP) and entrepreneurship faced by women in India. They find substantial barriers to LFP, and higher costs of expanding businesses through the hiring of workers for women entrepreneurs. However, there is one area in which female entrepreneurs have an advantage – the hiring of female workers – and this is not driven by the sectoral composition of female employment. Consistent with this pattern, policies promoting female entrepreneurship can significantly increase female LFP even without explicitly targeting female LFP. Counterfactual simulations indicate that removing all excess barriers faced by women entrepreneurs would substantially increase the fraction of female-owned firms, female LFP, earnings, and generate substantial gains for the economy. These gains are due to higher LFP, higher real wages and profits, and reallocation, with low productivity male-owned firms (previously sheltered from female competition) replaced by higher productivity female-owned firms previously excluded from the economy.
Blog » Aggregate Implications of Barriers to Female Entrepreneurship (2021, revised 2024)
Aggregate Implications of Barriers to Female Entrepreneurship (2021, revised 2024)
In this paper, the authors develop a framework for quantifying barriers to labor force participation (LFP) and entrepreneurship faced by women in India. They find substantial barriers to LFP, and higher costs of expanding businesses through the hiring of workers for women entrepreneurs. However, there is one area in which female entrepreneurs have an advantage – the hiring of female workers – and this is not driven by the sectoral composition of female employment. Consistent with this pattern, policies promoting female entrepreneurship can significantly increase female LFP even without explicitly targeting female LFP. Counterfactual simulations indicate that removing all excess barriers faced by women entrepreneurs would substantially increase the fraction of female-owned firms, female LFP, earnings, and generate substantial gains for the economy. These gains are due to higher LFP, higher real wages and profits, and reallocation, with low productivity male-owned firms (previously sheltered from female competition) replaced by higher productivity female-owned firms previously excluded from the economy.