Gender in Bolivian Production : Reducing Differences in Formality and Productivity of Firms

Abstract

A main goal of this study is to
 determine the variables responsible for the lower formality
 of women-owned businesses. The companion study (the World
 Bank 2007a) shows that Bolivia's informal sector is the
 largest in Latin America by many definitions and measures.
 It also provides a rationale for promoting formality given
 the many negative effects of a high rate of informality.
 These negative effects include a lower growth potential as
 informal firms tend to be less productive owing to limited
 access to physical, financial, and human capital, and a
 smaller scale of operations; negative fiscal impacts as
 informal firms "free ride" on services provided
 with fiscal resources; and negative social externalities,
 including weaker rule of law and public institutions,
 increased corruption, and weakened ability to enforce
 contracts. A second goal of this study is to identify
 gender-based productivity constraints that hinder the growth
 of female-owned businesses. First, author's analysis of
 the impact of formality on profitability shows that the
 gains of formalization for most female-owned businesses
 increase as the firms grow. Second, author's find that
 the smaller scale of operation of female-owned firms is one
 of the main causes of gender-based differences in
 productivity and profitability. However, most of the
 differences between male and female-owned firms diminish or
 disappear as firms grow.