Finance, Gender, and Entrepreneurship: India's Informal Sector Firms

31 Pages Posted: 16 Nov 2020

See all articles by Ira N. Gang

Ira N. Gang

Rutgers University - Economics Department; IZA Institute of Labor Economics

Indira Khangembam

Sikkim University

Kunal Sen

University of Manchester

Abstract

How does informal economic activity respond to increased financial inclusion? Does it become more entrepreneurial? Does access to new financing options change the gender configuration of informal economic activity and, if so, in what ways and what directions? We take advantage of nationwide data collected in 2010/11 and 2015/16 by India's National Sample Survey Office on unorganized (informal) enterprises. This period was one of rapid expansion of banking availability aimed particularly at the unbanked, under-banked, and women. We find strong empirical evidence supporting the crucial role of financial access in promoting entrepreneurship among informal sector firms in India. Our results are robust to alternative specifications and alternative measures of financial constraints using an approach combining propensity score matching and difference-in-differences. However, we do not find conclusive evidence that increased financial inclusion leads to a higher likelihood of women becoming entrepreneurs than men in the informal sector.

Keywords: entrepreneurship, financial constraints, gender, informal sector, difference-in-differences, India

JEL Classification: O12, G28, L26

Suggested Citation

Gang, Ira N. and Khangembam, Indira and Sen, Kunal, Finance, Gender, and Entrepreneurship: India's Informal Sector Firms. IZA Discussion Paper No. 13854, Available at SSRN: https://ssrn.com/abstract=3730452

Ira N. Gang (Contact Author)

Rutgers University - Economics Department ( email )

75 Hamilton Street
ECONOMICS, New Jersey Hall, Rutgers University
New Brunswick, NJ 08901-1248
United States
732-932-7363 (Phone)
732-932-7416 (Fax)

HOME PAGE: http://econweb.rutgers.edu/gang/research

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Indira Khangembam

Sikkim University

Kunal Sen

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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