Home-bias among Female Entrepreneurs: Experimental Evidence on Preferences from Pakistan

Abstract

Enterprises run by women in developing countries are often short-lived and small. Using data from an RCT with aspiring female entrepreneurs in Pakistan, we find that providing loans and training leads to business creation, but confirm that this effect is only observed in the short term. Moreover, four out of five new micro-enterprises are home-based. Through novel incentivized tasks, we find that both women and male decision-makers in their household favor women setting up a business, but display ‘home-bias’ in preferred business location and are willing to give up almost 60% of median profits for running the business from home. Women also exhibit a ‘home-bias’ in source of advice, refraining from taking advice from outsiders, even when it can increase task earnings. Our findings indicate that internalized gender norms may contribute to explaining the small scale and brief duration of businesses operated by women. Development interventions must take these gender norms into account when promoting female entrepreneurship.