Gender Specific Distortions, Entrepreneurship and Misallocation

Women account for a small share of all business owners and a small share of the market in India’s manufacturing sector. To account for these patterns, I estimate the extent of gender-specific distortions to operating a business using firm-level data. Feeding these estimates that differ across gender into a standard framework of heterogeneous producers replicates key features of the firm size distribution, on aggregate and across gender. While women face high entry barriers into entrepreneurship, they have modest impacts on female market shares. Accounting for the distribution of distortions, instead of its average, provides a more accurate view of the differential barriers to production women face and their quantitative relevance. Policies that promote female entrepreneurship are effective, yet have only marginal impacts on aggregate productivity. These findings are not unique to India, and apply across a broader set of countries