Nov 23, 2011

Agglomeration economies and female entrepreneurship

This interesting new paper by Ghani et al., describes the importance of agglomeration economies and female entrepreneurship in India:
This paper uses detailed micro-data on the unorganized manufacturing and services sectors of India in 2000-2005 to explore the spatial factors that promote female entrepreneurship and business ownership. The micro-data are a representative sample of the Indian economy, and the establishment records identify the gender of the owner for proprietary establishments (which account for greater than 95% of establishments). For most surveys, we can also identify establishments that are new entrants. From these micro-data, we develop relative rates of female entrepreneurship and business ownership at the district-industry-year level.
The central message is the high degree to which existing female business ownership enables future female entry.
We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry’s conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported. 

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