About half of the world’s population is self-employed, and self-employed women earn only about half as much as men, according to the World Bank. Social economists believed for years that increasing women’s access to capital would shrink the earnings gap.
But in developing countries, they found that new influxes of cash often went to shore up the businesses of men—whereas the women’s businesses more often stayed flat.
“There is no country in the world without a gender gap in earnings,” said Solène Delecourt, a Berkeley Haas assistant professor of management who studies inequality in business performance. “Women everywhere face unique constraints, and a one-size-fits-all solution sometimes can lead to positive benefits for men, but not for women.”
In three new studies, Delecourt and colleagues looked at why women-owned businesses in Uganda, Kenya, and India underperform businesses operated by men in those countries. Their findings not only include some surprises, but hold clues for specific strategies to address earnings inequality everywhere.
The “baby-profit gap” in Uganda
Delecourt teamed with Anne Fitzpatrick of the University of Massachusetts for a study on the “baby-profit gap,” published in Management Science.
Looking at data Fitzpatrick collected for an earlier study of small pharmacies in Uganda, the researchers noticed that while none of the men had children at work, about a third of the women were balancing childcare while running their businesses.
The childcare duties were taking a toll, literally: In a side-by-side analysis, the researchers found that the women who were running their businesses while taking care of their children earned less than half as much as the women without children in their stores.
“What we were seeing was unmistakable: We started to think of it as a baby-profit gap,” Delecourt said.
The study also shows how questions change—and overlooked insights emerge—when researchers with diverse backgrounds are in the field. “No one had looked at the data that way before,” Delecourt said. “We were both women expecting our second children, so perhaps that’s why we noticed the gap.”
Kenya: Location, location, location
Now Delecourt and Fitzpatrick, along with Laura Barasa of the University of Nairobi, and Layna Lowe and Anya Marchenko from UC Berkeley’s Center for Effective Global Action, are crunching data for another study on women’s business performance in Kenya.
The researchers compared the differences in earnings between men and women owners of about 2,000 small stores in Western Kenya, where women on average earn 75% less than men. While stressing that their findings aren’t causal, the researchers were able to trace 12% of the wage gap to one source: location. The stores run by women were almost always sited in less-desirable spots, typically farther from busy town centers. Some women were running home-based businesses, which averaged about 30% fewer customers.
The suspected reasons are firmly rooted in gender roles.
“The women tell us they want to be closer to home; they’re concerned about safety getting home after dark and worry whether their husbands will suspect them of having affairs if they’re late,” Delecourt said. The women also said working at home makes it easier to balance competing demands of home and work-life, such as childcare or chores.
“Gendered constraints at the intersection of family and the marketplace contribute to gender inequality in business performance,” the researchers concluded.
A novel experiment in Jaipur, India
The results of a third study didn’t just surprise Delecourt—they shocked her.
Focusing on the market in Jaipur, India, Delecourt and Odyssia Ng of the World Bank wanted to find out whether buyer behavior was contributing to the wage gap. Were buyers more reluctant to purchase from women? They expected the answer to be yes.
They constructed a field experiment that not only shows women’s earning power, but gives new meaning to the words “intrepid researchers.” They battled predawn inventory runs, rogue goats, and hungry rats who munched on the produce purchased for the experiment. Ng even came down with dengue fever.
In the end, they had six stores in prime locations, with identical inventories. They hired 282 sellers from the market—half of them women, half men—to come and run the businesses for a day.
They found that given the choice of equally attractive options, buyers did not select shops based on the proprietors’ gender. Male buyers were just as likely to buy from a female shop owner as women were to buy from a male shop owner.
“What we saw dispels so much of the bias about women in business,” said Delecourt. “If women are given the same business—in this case a functioning, well-stocked, well-located store—then their stores perform as well as men’s.”
Targeted solutions
Everyone pays a price for the constraints on women’s earning power, Delecourt believes. Less money for families means fewer opportunities for children. And suppressing women’s earning potential has an outsized impact on the aggregate economies of their countries.
Delecourt’s research suggests that targeted solutions to address known barriers could pave the way for further change. In Uganda, providing day-care support could open up earnings for women. In Kenya, better store locations may be a game changer.
Adjusted for cultural and social differences, these findings also underscore that while women globally face similar constraints, the solutions can’t be cookie-cutter.
“While my colleagues and I have been focusing on developing countries, we know day care is cited as one of the top reasons why women have been leaving the work force here in the U.S. during the pandemic,” Delecourt said. “Women face constraints due to their gender everywhere in the world. Bridging the gender gap requires a thorough understanding of women’s unique challenges in their specific context.”
