Abstract

Many studies have shown that female-owned micro-enterprises are less profitable and have lower returns to capital than their male-owned counterparts. In this paper, we investigate two possible drivers for the gender gap in business performance: 1) buyers are less likely to buy from women-owned businesses (demand-side constraints) and/or 2) women business owners use different business practices than men. In two field experiments that hold every business aspect fixed except for the gender of the owner, we precisely reject both of these explanations. We examine these drivers in the context of vegetable sellers in India, where observationally women make less than men. More specifically, we set up our own shops so that location, goods supplied, and hours of operation are held constant. In Experiment 1, we identify demand-side constraints by training confederate sellers to sell packaged goods at fixed prices using a standardized script, thereby controlling for seller behavior, such as bargaining styles. In Experiment 2, we only control for business characteristics (e.g. location, goods, hours), letting seller behavior respond endogenously. In both experiments, we find that women earn at least as much as men. Our results indicate that the estimated gender earnings gap in this context is neither due to differential demand-side constraints nor to seller behavior, but instead is likely driven by differences in capital constraints and location.

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