Solène Delecourt, O. Ng. (2019). “Do buyers discriminate against female-owned businesses? Two field experiments. ” Working Paper, Stanford University.
Gender inequality manifests itself at every step of the entrepreneurial process. By the time a woman is running her business, multiple factors have already constrained her profitability. How much of the gender gap can be explained by buyer’s behavior in the marketplace as against supply-side differences? Buyers might behave differently based on 1) a seller’s gender or 2) differential business characteristics by gender. To address this problem of confounding, we ran two field experiments that hold constant business characteristics and vary the owner’s gender, thus separating supply from demand factors. Before our randomized experiments, we collected data in India showing that men earn 50% more than women, men’s inventory is 40% larger than women’s and buyers are more likely to buy from male sellers. We set up our own market stalls in three different markets, keeping hours worked, location, size and setup constant, and provided the same type, quantity, and quality of goods to 272 owners–regardless of gender. To further test for demand-side discrimination, we also set up two shops in a large vegetable market and recruited confederate sellers to sell packaged goods using a standardized script. Our results show that providing men and women with the same business closes the gender gap in profitability, ruling out buyer’s discrimination. Women can earn as much as men, if given equal opportunity to do so. This finding challenges existing conclusions about the causes of the gender gap in business ownership and performance.