It's Getting Crowded in Here: Experimental Evidence of Demand Constraints in the Gender Profit Gap

This article considers market-level contributors to the well-documented gender profit gap among micro-entrepreneurs. Hardy and Kagy (2020) combine data from a garment-making firm census and market research survey in Ghana, uncovering a gender gap in the market-size-to-firm ratio and observing disproportionate self-reports of ‘not enough customers’ from female owners. They develop a simple model and discuss implications of potential gender differences in demand constraints. As experimental corroboration, the authors show that female-owned firms expand production and experience profit increases in response to random demand shocks, while male-owned firms do not. Nationally representative data echoes our experimental findings, showing more crowding in female-dominated industries.