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


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.

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