The Impact of Social Norms and Household Dynamics on Female-owned Enterprises

Many women in sub-Saharan Africa run their own businesses, most of which are small. What is more, female-owned businesses significantly underperform their male-owned counterparts creating a gender profit gap. To date, little is known about the determinants of this gender profit gap. Recent work suggests that, when allocating resources, female microentrepreneurs do not decouple their business from their family lives. Not only decisions about finances but also decisions about time use are often intertwined, especially when entrenched social norms prescribe the burden of domestic duties to women. While such a division in household responsibilities could reflect comparative advantages within the household or the labour market, it could also indicate potentially inefficient conformity to social norms. This project seeks to understand whether social norms related to household and childcare responsibilities in Ethiopia constrain women’s businesses.

The research design induces experimental variation in female microentrepreneurs’ incentives to shift from home production to market work. More specifically, Salcher and Demeke randomise whether women have access to an additional income-earning opportunity with randomly varying payoffs. Crucially, these weekly tasks need to be completed adjacent to but outside regular work hours and in the woman’s business location. Women’s regular work hours and location as well as her other time uses (e.g. housework, leisure) will be measured via a purposefully designed smartphone app through which earning opportunities will also be announced. This means that the treatment variable, the incentives of a female microentrepreneur to conduct additional market work, can be exogenously determined. Through this, the researchers will assess whether female microentrepreneurs respond to profitable business opportunities and, if so, what returns to work time are required to induce them to shift out of home production.

By linking the performance of female-owned microenterprises to time allocation decisions shaped by social norms and household decisions, this project addresses policymakers’ concern of low-growth entrepreneurship and limited jobs creation. Given the benefits of employment creation and poverty reduction, addressing constraints to women’s business performance can represent an area of untapped potential for long-term growth and prosperity. Lessons learned from this project can also have important implications for the design of non-labour market policies (e.g. increasing access to affordable early childcare or household electrification) as alternative avenues for strengthening market forces and private sector development.

Authors

Isabelle Salcher

New York University

Eyoual Demeke

University of California, Berkeley