Explaining Firm-Level Gender Productivity Differential in Africa

The gender gap in firm productivity is the widest in Africa, and evidence on the determinants of this variation remains thin. We exploit a harmonized firm-level survey dataset of 46 African countries over the period 2006-2018 to explain the productivity gender differential and identify the association pathways. Special focus is placed on the behavior with respect to innovation and technology adoption and dealing with market inefficiencies and institutional barriers. We construct five composite indices to reflect the categories of productivity determinants and apply mean and quantile decomposition approaches. Our estimates indicate a significant productivity differential by the gender of entrepreneur in Africa, specifically in the Northern and Eastern regions. Interestingly, the differential is not induced by educational nor entrepreneurial abilities but rather by women being more negatively affected by institutional barriers, such as corruption and perceptions about it, and market inefficiencies, such as the lack of access to finance. These results can be explained by gender-based behavioral differences and institutional structures, which can as well affect women’s selection of business activity, making their firms less likely to benefit from some innovation and technology adoption activities.