Rule of Law and Female Entrepreneurship

72 Pages Posted: 14 Oct 2019 Last revised: 16 Jan 2022

See all articles by Nava Ashraf

Nava Ashraf

London School of Economics & Political Science (LSE) - London School of Economics

Alexia Delfino

London School of Economics and Political Science

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Date Written: October 2019

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.

Suggested Citation

Ashraf, Nava and Delfino, Alexia and Glaeser, Edward L., Rule of Law and Female Entrepreneurship (October 2019). NBER Working Paper No. w26366, Available at SSRN: https://ssrn.com/abstract=3469392

Nava Ashraf (Contact Author)

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

Alexia Delfino

London School of Economics and Political Science ( email )

Edward L. Glaeser

Harvard University - Department of Economics ( email )

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