Female entrepreneurship: Do urban centers ease out the challenge? an analysis for Pakistan

Abstract

Treading on a business venture with the aim to be either self-employed or an employer is a daunting task in a developing economy. The challenges become yet more formidable if you do not belong to the gender that globally dominates the markets. The commonly identified obstacles encountered by female entrepreneurs are wide ranging. Social norms established through culture or beliefs, whereby women often have preassigned roles leave a limited choice for entrepreneurial pursuits. Enterprising women who somehow cross this barrier have yet more challenges to face. Female entrepreneurs usually do not find support from the business networks; it is hard to find mentors or professional support who can guide in the business decision-making process. Also, frequently, women are constrained on account of access to information and credit. The key question here is to find out the policy framework which can make these constraints less binding for female entrepreneurs. Specifically, this chapter attempts to determine if the social norms and economic opportunities prevalent in an urban economy are conducive to the growth of female entrepreneurship. Urban centers, relative to rural areas, offer better educational, training, and financial facilities. Besides, cities are the hub of employment opportunities due to scale and agglomeration economies and provide market linkages necessary for business growth. On the other hand, the high density of economic activity spurs congestion costs which along with greater factor demand may deter entrepreneurship. To empirically test the hypothesis that urban economies facilitate women entrepreneurs, we use data from the Labor Force Survey of Pakistan. As the female entrepreneurial decision is subject to self-selection, we use the Heckman correction in estimation. Statistics and regression results indicate that the proportion of female entrepreneurs is higher in urban parts of districts while controlling for individual and district-specific characteristics. Besides, women entrepreneurs in urban areas earn higher profits. Consequently, a rural-to-urban migration results in welfare improvement of the female entrepreneur.