Home-based Enterprises: Experimental Evidence on Female Preferences from Pakistan

Abstract

Enterprises run by women in developing countries are often small, unprofitable and short-lived. The low profitability and high vulnerability of female businesses is often attributed to the fact that they are largely home-based and that women’s business networks are typically small. Using data from a randomised trial with aspiring female entrepreneurs in Pakistan, we confirm that four out of five new micro-enterprises in this sample are home-based, and that home-based businesses are more likely to close within two years. Through novel incentivized tasks conducted with female respondents and male decision-makers in their household, we find that both men and women are willing to give up almost 60% of median profits for running the business from home. Women also refrain from taking advice from outsiders, even when it can increase task earnings. Women’s preferences are correlated with their business experience. We find limited evidence that these preferences correlate with other factors such as female agency within the household, women’s restricted mobility and their household responsibilities. Our results suggest a role for social norms in explaining the small scale and vulnerability of businesses operated by women and they should be taken into account by development interventions promoting female entrepreneurship.