Abstract
This paper uses data from 2408 micro and small businesses in Ecuador to study business profit differentials by gender. The results point to unpaid work—time devoted to household chores, child care, and care for the elderly—as the largest single factor explaining 33% of the difference in profits observed between male- and female-run businesses. When comparing male and female business owners with similar business and personal characteristics, the difference in business profits disappears. The results point to initial endowments, rather than returns on those endowments, as the reason why female-run businesses are less profitable. Also, they indicate that male and female entrepreneurs are equally effective as managers provided they have access to the same resources, including time.
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Notes
A banking agent, also known as non-bank correspondent, is a retail outlet contracted by a financial institution to act as a distribution channel and process the financial transactions of the bank’s clients.
The survey was conducted by Investigaciones Socieconómicas (ISVOS) under my supervision as part of a larger study financed by the IDB’s Multilateral Investment Fund (MIF), to quantify the impact of business training on the adoption of best practices and business profitability for this target population.
The sample was drawn from the universe of 4580 non-bank correspondents in the provinces of Pichincha and Guayas in Ecuador, of which 63% were women. According to the National Survey of Employment, Unemployment and Underemployment of December 2015, 41.9% of business owners in Ecuador were women.
The “use of time” section on the survey asked about the time respondents spent doing different activities during the day as well as the activities they often did simultaneously, when total time exceeded 24 hours a day.
I add 1 to the variables before doing the log transformation to avoid errors when entrepreneurs report zeros. Variables for which entrepreneurs report zeros include daily profits on a bad day, capital, and number of employees. Entrepreneurs do not report negative values for any of the variables. Variables are log transformed using the following relation: T(X) = log(1 + X), when X = 0,T(X) = 0.
This latter result is consistent with Loscocco et al. (1991), who find that “role strain” rather that marital status and number of dependent children explain gender discrepancy in profits.
Hours devoted to care are negatively correlated to business profits, at the 10% significance level, in the alternative specifications. See Appendix.
The difference with respect to the values reported in Table 7 are due to the adjustment done before the log transformation.
Businesses on support (off support) are businesses that can (cannot) be matched because they are in (outside) the region where there is a strictly positive probability of finding observations for male and female business owners.
It is unlikely that women and men have developed different but equally effective traits, attitudes, and values that have a strong effect on their businesses profits and cancel each other out.
Given the high value of Γ, it is unlikely that women and men have developed different but equally effective traits, attitudes, and values that have a strong effect on their businesses profits—the hypothesis espoused by the social feminist theory.
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This study was financed by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB). The author is grateful to Banco del Pichincha for its support in conducting the study and to three anonymous referees for useful comments and suggestions on an earlier version of this paper. The views presented in this paper are those of the author; no endorsement by the Inter-American Development Bank, its Board of Executive Directors, or the countries they represent is expressed or implied.
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Arráiz, I. Time to share the load: gender differences in household responsibilities and business profitability. Small Bus Econ 51, 57–84 (2018). https://doi.org/10.1007/s11187-017-9925-z
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DOI: https://doi.org/10.1007/s11187-017-9925-z