Do Inequality-Based Entry Barriers Deter the Formation of Female-Owned Firms in Nigeria?

Abstract

In this paper, we consider the role of inequality-based entry barriers on the formation of female-owned firms in Nigeria. With data from the 2010 World Enterprise Survey, we estimate the parameters of a simple model of female-owned firm entry to determine the role of inequality-based barriers on the number of female-owned firms across city-industry clusters in Nigeria. Parameter estimates from count data specifications of firm entry reveal that access to financing, land, and licenses/permits absolutely deter the entry of female-owned firms, as these entry barriers are proportional to the probability of observing no female-owned firms. In general, barriers to securing land constrain the entry of female-owned firms beyond the process determining absolute entry deterrence. This suggests that the market entry and underrepresentation of female-owned among firm-owners and entrepreneurs in Nigeria is, at least in part, caused by gender inequality in general. As private firm output dominates the gross domestic product of modern economies, our findings suggest that the reduction of gender inequality in Sub-Saharan Africa would result in more female-owned and entrepreneurs which would catalyze economic growth.