Gender Gaps in Entrepreneurship and their Macroeconomic Effects in Latin America

Objective: To analyze gender gaps in entrepreneurship in Latin America and the Caribbean and quantify their aggregate effects on productivity and income per capita. Methodology: Gender differences in entrepreneurship were documented using evidence on the participation and size of female-run firms, and the theoretical framework developed by Cuberes and Teignier (2022) was employed to quantify their aggregate effects. The model assumes that the barriers faced by some women to become firm managers increase with managerial talent, leading female-run firms to be smaller than male-run firms in equilibrium. Findings: The results show that only about one fourth of firms are managed by women and that female-run firms are approximately three times smaller than those managed by men. For Latin America, gender gaps in entrepreneurship generate a 9% loss in output per capita, entirely explained by resource misallocation and the resulting decline in aggregate productivity. This loss is 1.3 times larger than that obtained under a framework in which barriers to entrepreneurship are assumed to be independent of talent. Implications: The findings indicate that reducing gender-based barriers to entrepreneurship can improve resource allocation, increase aggregate productivity, and raise income per capita. Originality: The study quantifies the aggregate costs of gender gaps in entrepreneurship using a theoretical framework in which barriers to entrepreneurship depend on managerial talent.