Aggregate Costs of a Gender Gap in the Access to Business Resources

Abstract

Abstract We quantify the aggregate costs of a discriminatory restriction against women in the access to business resources. To do so, we develop a general equilibrium model with an endogenous size distribution of production units, which are run by either female or male entrepreneurs. In this setting, we introduce a distortion that limits the amount of capital that women can use to run their businesses. We calibrate the model to match data from benchmark economies that exhibit relatively egalitarian labor market results between women and men, except in entrepreneurship. Our counterfactual analyses show that a gender-specific capital constraint causes an output loss between 14% and 28% and a fall in aggregate productivity between 12% and 20%. Furthermore, we show that most of the output loss is accounted for by a fall in total factor productivity. Lastly, we show that the aggregate cost of the distortion is mainly triggered by preventing the most skilled women from running bigger businesses, and not the exit of women from entrepreneurship.