Gender, Social Norms, and Entrepreneurship

In this paper, we analyze two puzzles on entrepreneurship and gender. First, a number of field experiments in developing countries on business training and business grants have shown that it is very difficult to raise entrepreneurial outcomes for female entrepreneurs. Second, women tend to be over-represented in the informal sector in developing countries, and in particular in microfinance institutions. We present a simple model of entrepreneurship that aims to explain these two puzzles. In the model, entrepreneurship arises from the interaction of ability, access to capital and labor investments. To this, we add two social norms that are widespread in developing countries (but not only): women have domestic obligations that restrict the time they can dedicate to their businesses (while men do not); and women have less access to capital than men. Consequently, women self-select into the informal sector since it requires less capital and labor investment. The model also indicates that raising entrepreneurial capabilities of time-constrained women in just one or two dimensions, like ability (via business training) and capital (via business grants), might not be sufficient to promote entrepreneurial success. We present evidence that supports these hypotheses using data from a field experiment in Tanzania with microfinance clients.