Gender, formality, and entrepreneurial success
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Gender, formality, and entrepreneurial success Lars Ivar Oppedal Berge & Armando José Garcia Pires
Accepted: 13 March 2019 # Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract In this paper, we address two entrepreneurship puzzles prevailing in developing countries. First, field experiments on business training programs and grants have shown that it is much more difficult to improve business outcomes for female entrepreneurs than for their male counterparts. Second, empirical studies have revealed that it is difficult to increase entrepreneurial performance in the informal sector. We argue that an extended version of the entrepreneurship model in Lucas (Bell Journal of Economics, 9, 508–523, Lucas 1978) can provide insights into these recurrent puzzles. In particular, if female entrepreneurs are time constrained, interventions that only target business ability and credit constraints may not be sufficient to raise the entrepreneurial outcomes of female entrepreneurs. In addition, if informal entrepreneurs face business constraints in terms of both their access to credit and entrepreneurial ability, interventions that target these constraints together can have a potentially greater impact than those that target either in isolation. We support our theoretical predictions using data from a field experiment with microfinance clients, conducted in Tanzania. The study was organized by The Choice Lab and financed by grant 204691 from The Research Council of Norway. L. I. Oppedal Berge Norwegian School of Economics (NHH), Bergen, Norway e-mail: [email protected] A. J. Garcia Pires (*) Centre for Applied Research at NHH (SNF), Bergen, Norway e-mail: [email protected]
Keywords Field experiments . Entrepreneurship . Gender . (In)formal sector JEL classification A13 . L26 . O12 . O16 . O17 . O55
1 Introduction The empirical literature on entrepreneurship in developing economies presents two main puzzles. First, field interventions focused on business training programs and business grants aimed at stimulating entrepreneurship tend not to succeed in raising the incomes and business profits of female entrepreneurs relative to their male counterparts.1 The idea behind business training is to increase entrepreneurial/business ability via the teaching of good business practices. In turn, the premise of business grants is to reduce entrepreneurial credit constraints. Second, many empirical studies have revealed that it is difficult to improve the business outcomes of poor entrepreneurs, especially in the 1 See, for instance, Field et al. (2010), Karlan and Valdivia (2011), Banerjee and Duflo (2011), Giné and Mansuri (2011), Klinger and Schündeln (2011), Bruhn and Zia (2012), de Mel et al. (2013, 2014), Drexler et al. (2014), Karlan et al. (2015), Berge et al. (2015a), Bulte et al. (2015), Higuchi et al. (2015), Higuchi and Sonobe (2015), and Angelucci et al. (2015). In addition, several studies reveal that female entrepreneurs tend to have worse entrepreneurial outcomes than males (see Fairlie and
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