Working Paper: NBER ID: w26366
Authors: Nava Ashraf; Alexia Delfino; Edward L. Glaeser
Abstract: Commerce requires trust, but trust is difficult when one group consistently fears expropriation by another. If men have a comparative advantage at violence and there is little rule-of-law, then unequal bargaining power can lead women to segregate into low-return industries and avoid entrepreneurship altogether. In this paper, we present a model of female entrepreneurship and rule of law that predicts that women will only start businesses when they have both formal legal protection and informal bargaining power. The model's predictions are supported both in cross-national data and with a new census of Zambian manufacturers. In Zambia, female entrepreneurs collaborate less, learn less from fellow entrepreneurs, earn less and segregate into industries with more women, but gender differences are ameliorated when women have access to adjudicating institutions, such as Lusaka's “Market Chiefs” who are empowered to adjudicate small commercial disputes. We experimentally induce variation in local institutional quality in an adapted trust game, and find that this also reduces the gender gap in trust and economic activity.
Keywords: female entrepreneurship; rule of law; gender norms; trust; economic activity
JEL Codes: J16; K40; O15; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of legal protections (P14) | segregation of female entrepreneurs into low-return industries (J16) |
| weak rule of law (P37) | lower rates of female entrepreneurship (L26) |
| proximity to adjudicating institutions (K41) | reduction in gender gap in trust and cooperation (C71) |
| access to adjudicating institutions (K41) | increased trust and economic activity among women (F63) |