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  • Small Firm Diaries Team

Your Gender Profit Gap Questions Answered

Updated: Mar 30, 2021

Why do women-led businesses earn less than those of their male counterparts? How does intra-household bargaining affect family decision making? How and how much does fear of expropriation change the way women invest? And how is the pandemic affecting gender dynamics among small firms? These were some of the questions we tackled in our latest faiVLive webinar along with some of the field’s leading researchers and practitioners studying the gender profit gap (watch the recording; find links to relevant papers and publications; and read three takeaways from the session).

During the live session we didn’t get to all the audience Q&A, so two of our panelists, Morgan Hardy and Tatiana Rincón, reviewed some of the questions that you asked in the chat. Here are their answers:

Do you think women are less likely to have the goal to grow their business? Are there reasons for women wishing to stay small? Would it mean they stay more under the radar of officials or male relatives? Or just because it is less of a headache to have a small business?

Tatiana: At least from personal experience when talking to women that run micro-businesses, they are looking to earn some money while making this activity compatible with their already heavy workload. Therefore, I think we need to understand what is the priority for them, and based on that, assess those businesses. Based on that, women choose businesses they can run from home while taking care of the rest of the family members.

Morgan: I think that this question is a bit more philosophical than it initially lets on. It’s subtly implying that, because women, on average, may have different reported goals than men in the current world context, we should focus instead on differing goals by owner gender rather than asking whether those differences are in fact something innate or learned through inequalities and segregations set by societies and cultures. The focus on profit gaps is not to say that this is all that matters. The determinants of priorities themselves is something that may be of interest, both in understanding profit gaps but also in thinking about what level (if any) would be acceptable. That is a larger can of worms and, as I said, probably a philosophical one.

What do we know from the research about the extent to which women choose a sector to work in versus what constraints they face in choosing a sector? The Zambia study suggests this, but are there others? Are there outright prohibitions against women entering certain sectors, or are they constrained because entering those sectors would require behaviors that are prohibited to women?

Morgan: I found that study in Zambia to be very interesting! When my work in Ghana on industry gender segregation and crowding gaps first alerted me to a need for more work on industry choice, I had implicitly assumed researchers would point to something similar to what is discussed in gender wage gap work - child bearing and rearing expectations. Nava [Ashraf]’s work to me shows that these determinants can stem from places I didn’t think about and makes this line of literature all the more exciting and important.

Have you seen any data sources measuring the “success” of women-owned firms that are doing it well and looking beyond the traditional measures? Aside from profits, growth, and well-being, what other outcomes should be explored?

Morgan: Revisiting my above statement on the implications of this focus shift, I want to say that I DO think that considering other measures than profits for ALL enterprises (both male- and female-owned) would be interesting and important. Documenting differences in these successes and understanding them would also potentially yield insights into gender differences in priorities. I just take issue with assuming these differences are necessarily efficient in some way and reflective of innate priorities by gender. I would see them more as a learning tool for discussion.

Tatiana: Use of time as well as agency are key to understand overall well-being. Income, savings and assets are important as well, but they should not be the only indicators. McGill University conducted a Women’s Empowerment in Development series approx a year ago. They had one session on using quantitative methodologies to study women’s empowerment, including some key resources including a guide by Rachel Glennester and others from JPAL.

Is it possible to improve women-led businesses (e.g. increase capital or skills) through deepening relationships with other women? And could this also help empower those who are struggling within their households?

Tatiana: From my personal experience the answer is yes. However, I believe this can vary depending on the cultural context. There are societies where people have more experience in teamwork (not Latin America); in societies with stronger community ties, this may work better.

Morgan: One of the components of the Foundational Analysis to Close The Gender Profit Gap project is a general desire to re-analyze data from existing studies that didn’t necessarily take a gender lens before. There are an increasing number of studies on firm network manipulation and implications. This question reminds me that these studies may be useful to answer this exact question!

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