Female Entrepreneurship, Financial Frictions and Capital Misallocation in the US

• Authors: Marta Morazzoni and Andrea Sy.
• BSE Working Paper: 1299 | November 21
• Keywords: Financial constraints , gender differences , entrepreneurship , misallocation , aggregate productivity
• JEL codes: O11, E44, D11
• Financial constraints
• gender differences
• entrepreneurship
• misallocation
• aggregate productivity

We document and quantify the effect of a gender gap in credit access on both entrepreneurship and input misallocation in the US. We show that female-owned firms are more likely to be rejected when applying for a loan and have a higher average product of capital, a sign of gender-driven capital misallocation across firms. Calibrating a heterogeneous agents model of entrepreneurship to the US economy, we establish that such gap in credit access explains the bulk of the gender differences in capital allocation across firms, and more than a third of their disparities in entrepreneurial rates. In a counterfactual exercise, we illustrate that eliminating this credit imbalance leads to a 4% increase in output, and that fiscal policies affect differently female and male entrepreneurial margins in the presence of gender gaps in financial access.