For people who teach de Mel, McKenzie and Woodruff (returns to women micro-entrepreneurs =0!)… a possible important new complication

In a 2009 paper, David McKenzie and coauthors Chris Woodruff and Suresh de Mel find that giving cash grants to male entrepreneurs in Sri Lanka has a positive and significant return, while giving the same to women did not. David followed this up with work with coauthors in Ghana that compared in-kind and cash grants for women and men. Again, better returns for men (with in-kind working for some women). Taken together, these paper (with different, thoughtful explanations in each) could lead you to question the impacts of simply giving capital to female entrepreneurs. A thought provoking new paper from Arielle Bernhardt, Erica Field, Rohini Pande, and Natalia Rigol advance our thinking on this and also complicates things. Going back to the old-school idea that households might be trying to jointly maximize income, Bernhardt and co. argue that investment will be in the household enterprise with the higher returns. And this could be a male-owned enterprise. Bernhardt and co. look at this question using data that some of their authors have worked on (from a microfinance experiment in Kolkata), but also pulling in the data from the two experiments mentioned above that David was involved in. Their model of the household leads them to the question: what happens to male enterprises in a household when you give cash to the female?

Now, let’s move over to Sri Lanka and a cash grant for enterprises.   Here again the average effect is zero.   However, for women in households where they have the only enterprise profits increase by 30 percent (significant at 10 percent).   And for all households Bernhardt and co. find a significant increase in total household income of 8 percent (a footnote explains that their sole/multiple enterprise regression is underpowered – they find (insignificant) results of +5 percent for sole entrepreneur households and +8 percent for multiple entrepreneur households).

Source: Money for her or for him? Unpacking the impact of capital infusions for female enterprises | Impact Evaluations

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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