Household Matters: Revisiting the Returns to Capital among Female Microentrepreneurs

Empirical studies in developing countries have repeatedly shown that relaxing microentrepreneurs’ capital constraints through access to grants results in substantial profit gains. This finding demonstrates that microentrepreneurs have high returns to capital and are poised to take advantage of investment opportunities when provided with the resources to do so.

The authors of this paper propose and evaluate an alternative explanation for low observed returns to female relative to male entrepreneurs: both men and women invest grants and loans into high-return enterprises within their household, but these enterprises are more often male-owned than female-owned. This gives rise to large differences between returns to capital measured at the household versus enterprise level.