Gender Gaps in Credit Access and Womens Entrepreneurial Choices

Entrepreneurship is driver of economic growth. However, new entrepreneurs often lack access to credit, which may impede this entrepreneurial potential and consequently hinder economic growth. In this context, one issue that has received considerable attention is that of gender-specific financial frictions, that make it more difficult for women to raise external funding when starting a business. The ACCESS project studies the implication of such gender-specific financial frictions for women’s entrepreneurial choices in the Norwegian context. The project uses detailed Norwegian administrative data to study whether financial frictions induce female entrepreneurs to opt for more 'gender stereotypical' industries, and investigates how that affects the performance of their businesses. We hypothesize that women face less financial frictions in industries that are commonly regarded as more 'feminine'. However, if these industries differ in their growth potential and average return on investment from traditionally 'masculine' industries, these decisions will result in heterogeneous business performances across gender. We will combine empirical and theoretical methods to analyze the importance of both financial and childbearing frictions on gender gaps in entrepreneurship. Childbearing frictions relate to women being biologically more constrained in the ages when they can have children and their having usually to take on more childcare responsibilities. Consequently, if financial constraints force young women to postpone their decision to become entrepreneurs, such postponement may result in fewer female entrepreneurs due to the more demanding childbearing constraints. We will use our results to evaluate the effectiveness of policies aimed at promoting entrepreneurship among females.

Entrepreneurship is a key factor for economic growth. However, new entrepreneurs often lack access to credit, which may impede the full realization of entrepreneurial potential in an economy. In this context, one margin that has received considerable attention are gender-specific financial frictions, meaning that it is more difficult for women to raise external funding when starting a business than it is for men (see, e.g., Morazzoni and Sy 2022). While the presence of such gender-specific financial frictions has been extensively documented, their implications for women’s further entrepreneurial choices, especially in the Norwegian context, are much less understood. ACCESS aims to fill this gap. First, it uses granular Norwegian administrative data to study whether financial frictions induce female entrepreneurs to sort into more 'gender stereotypical' industries and how that affects the performance of their businesses. We hypothesize that women face less financial frictions in industries that are commonly regarded as more 'female'. However, if these industries differ in their growth potential and average return structure from traditionally 'male' industries, such sorting results in heterogeneous business performances across gender. Second, we will combine causal estimates obtained from natural experiments with a structural model to quantify the joint importance of financial and childbearing frictions on gender gaps in entrepreneurship. Childbearing frictions relate to women being biologically more constrained in the ages when they can have children. Consequently, if financial constraints force young individuals to postpone their decision about becoming entrepreneurs, such postponement may endogenously result in fewer female entrepreneurs through the presence of childbearing constraints, which are more binding for women. Finally, we will use the calibrated model to evaluate the effectiveness of policies that aim at promoting female entrepreneurship.