A Gender Penalty for Firm Performance in India’s Informal Manufacturing Sector

Abstract

Women entrepreneurs are preponderant in the informal sector of developing economies. Compared to the gender wage gap, disparities among self-employed workers have received little attention, particularly outside the OECD context. In this study I use Indian National Sample Survey (NSS) data to show that female-headed firms perform significantly worse than male-headed
firms, controlling for differences in education, assets, working hours, industry, geographical region, and other relevant controls. Oxaca-Blinder decomposition shows that 75 percent of the performance gap is driven by differences in endowments. The gender performance gap does not exist for those female-owned firms that are able to employ wage-workers, suggesting that women are penalized for their care-work responsibilities. I also show that State-level variation in the size of the gender penalty is correlated with women’s status as measured by the Gender Development Index.