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Rule of Law and Female Entrepreneurship

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  • Nava Ashraf
  • Alexia Delfino
  • Edward L. Glaeser

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

  • Nava Ashraf & Alexia Delfino & Edward L. Glaeser, 2019. "Rule of Law and Female Entrepreneurship," NBER Working Papers 26366, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26366
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    Cited by:

    1. Fang,Sheng & Goh,Chorching & Roberts,Mark & Xu,L. Colin & Zeufack,Albert G., 2020. "Female Business Leaders, Business and Cultural Environment, and Productivity around the World," Policy Research Working Paper Series 9275, The World Bank.
    2. Lang, M & Seither, J, 2022. "The Economics of Women s Entrepreneurship: Evidence from Building Skills in Uganda," Documentos de Trabajo 020563, Universidad del Rosario.
    3. Edward L. Glaeser, 2020. "Urbanization and Its Discontents," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 46(2), pages 191-218, April.

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    More about this item

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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