Enterprise Surveys 92276 Enterprise Note Series Gender Presence of Women in Top Managerial Positions 2014 Mohammad Amin and Asif Islam T he presence of female top managers in the private sector signals the existence of high paying jobs for women and also serves as further encouragement for other women to seek better employment. This note looks at the proportion of female top managers in private firms in 86 developing countries and its relationship with factors including country income level, gender disparity in education, firm-size, etc. The average proportion of top female managers is quite low at about 19 percent. This appears to be driven in part by gender disparity in education level and the lack of female managers in relatively large firms. Enterprise Note No. 29 Introduction and Blank 1999). This note aims to highlight patterns between female top managers in private firms in developing Gender disparity is now recognized as a pervasive countries and various factors such as country income level, phenomenon across the world (Hausman et al. 2006). A educational parity, political freedom and firm size. These number of studies show that women lag behind men in relationships are important for the formulation of more areas such as education, health, political empowerment, informed and effective gender-based policies. wage rates and incomes, and labor force participation The presence of female managers in private firms is rates. Consequences of gender disparity do not stop with determined through the response of a survey question lower well-being of women relative to men but may extend from the World Bank Enterprise Surveys—“Is the top to lower growth and lower economic development (see for manager female?” The Enterprise Surveys use standard example, Klasen 2002). As a response, a common policy survey instruments to collect firm-level data on a country's pursuit is the alleviation of constraints that impede women’s business environment from business owners and top labor force participation. One concern with focusing on managers. The survey is designed to be representative of participation rates is that increased women’s employment a country's private non-agricultural economy. Sampling is often concentrated in low paying and vulnerable jobs. weights used are normalized so that each country has equal Hence, it is crucial to examine the presence of women weight. The percentage of firms with a female top manager in not only high paying jobs but in jobs with significant averaged across all surveyed countries seems low at about 19 World Bank Group decision making responsibilities which are thus less percent; it ranges between a high of 39 percent (St. Vincent vulnerable (Elson 1999). and the Grenadines) and a low of 0.1 percent (Yemen). The This note looks at the presence of female top managers findings are as follows. in private firms in 86 developing countries. The presence of female top managers signals the existence of high paying The presence of female managers increases jobs for women and also encourages other women to seek with income level better employment. For example, women in top managerial positions may serve as role models for other women to Available evidence suggests that gender gaps in various seek better employment and higher paying jobs. Also, in dimensions, such as education level, health, political contrast to male managers, female managers are less likely empowerment, labor force participation, etc., tend to to discriminate against other women (as reported in some decrease with income level. While this may come as no of the studies) and therefore more likely to promote female surprise, the strength of the relationship between gender workers to higher paying jobs (see for example, Altonji disparity and income is not immediately obvious. Also, as in the case of labor force participation rates, the relationship Greater gender equality in education is with income level is not always straightforward–increase in associated with a sharp increase in female income is associated with lower women’s participation rates managers at low income levels and the relationship becomes positive only when income crosses a minimum threshold level. Greater gender disparity in education levels (favoring men What do the data say about the participation of women in over women) has been linked to slower overall economic managerial positions and income level of the country? growth rate, higher poverty and lower income levels Figure 1 shows that the percentage of female managers for women relative to men. Managers in the organized in a country increases with (log of ) GDP per capita and private sector are likely to be highly educated individuals this relationship is both statistically significant (at the 1 and hence it is natural to expect a higher proportion of percent level) and also economically large. For example, female managers in countries where there is greater gender moving from the country at the 25th percentile (Guyana) parity in education. The data do not reject this hypothesis. to the 75th percentile (Argentina) level of income in our We use the average of the ratio of women’s to men’s sample is associated with an increase in firms with a female gross enrollment rates in primary, secondary and tertiary manager by 3.2 percentage points. This is a large increase education taken from United Nations (year 2005 values) given that the mean level of female-managed firms in our as our measure of gender parity in education.1 Figure 2 sample equals 19 percent. Interestingly, there is no evidence shows that there is a strong positive relationship between of any non-linearity in the stated relationship. This is not gender parity in education and the percentage of female- surprising since our sample derives from the formal or the managed firms in a country. For example, moving from the registered sector and hence does not capture the broader 25th (Vietnam) to the 75th percentile (Dominica) value of structural features that tend to drive the non-linearity in gender parity in education is associated with an increase in women’s labor force participation mentioned above. the percentage of firms with a female top manger by 3.4 GDP per capita is a proxy for a large number of variables percentage points. The increase is statistically significant (at such as human capital, quality of infrastructure, governance the 1 percent level). Interestingly, the positive correlation and institutions, etc. As mentioned above, gender specific between GDP per capita and the percentage of firms with factors such as women’s to men’s education level is also female mangers (shown in figure 1) disappears completely positively correlated with GDP per capita. Hence, one and we get a near zero correlation between the two once might wonder if the positive relationship shown in figure we control for the gender parity in education. In other 1 is driven by some specific covariate of GDP per capita. words, we cannot reject the hypothesis that the channel Below, we suggest that gender equality in education is the through which overall economic development benefits the likely factor driving the positive relationship in the figure. cause of female managers is an improvement in education Figure 1 Higher GDP per capita is Figure 2 Greater gender parity in associated with more female education is associated with top managers more female top managers 40 VCT MNG LAO 40 VCT RHL BLR BHS NIG HND IDN VEN LVA MNG POL 30 LAO HHS UKR NIG RHL Firms with a female BEN HND top manager (%) VNM IDN VEN POL LVA BLZ BGR EST NER NER NER BRB 30 NEM NER KGZ PRY UKR Firms with a female BOL BEN top manager (%) MLI SLV KNA VNM MDA TTO BLZBSR BGB EST 20 RWA URY RUS SVK NER MKD GAR NER NEM NER NEMNEMJAM NEM CZE CZE NPL GUY CHNECU BRA ATG PRY CPV BWA BOL SLV NER MWI GTM SRB SVN MLI KNA TGO SUR PER CRI MEX LTU 20 URY MKD SRB RUS SVK ZAR ETH NER NER NER BIH HUN MKD CAF COL TUR NPL CWF CHN ECUBRA NER BFA TJK UZB CPR TUR DOM GTM MNW BWA 10 CMR ARG TGO SUR CRI SVR LKA PER HUN ZAR ETH ATG MEX ERI UZB TCD CAF TJK COL NBR BFA UZB DOM BGD AZE CHL 10 CMR ARG LKA IRQ ERI TCD YEM 0 AZE BGD 6 7 8 9 10 YEM GDP per capita (log values) 0 .6 .8 1 1.2 Source: Enterprise Surveys (various years) and World Development Gender parity in education Indicators, World Bank (various years). Source: Enterprise Surveys (various years) and United Nations (2005 values). Note: Gender parity in education is defined as the average of the ratio of female to male enrollment rates in primary, secondary and tertiary education. Due to data availability issues, year 2005 values are used for the gender parity in education measure. 2 for women relative to men. However, it is also possible that and legal origin matter but only through education level of a high correlation between income and gender disparity men versus women. Another possibility is that democracy in education does not allow for a proper identification of and legal origin do not matter for women’s participation the true relationships. Deciphering the true relationship in management and they spuriously pick up the effects between income, education and female-managed firms is an of education. The third possibility is that controlling for important task for future research. education does not allow for the true effects of democracy and legal origin to play out. A rigorous analysis is required Culture and political freedom do not seem to determine which of these cases hold. Last, following to matter for women’s participation in the literature, we also looked at culture captured by the management once education disparities are religious affiliation of countries and found the results for accounted for culture were similar to those reported for democracy and legal origin above. Evidence of the role of politics and culture in shaping gender related issues is mixed and far from conclusive. The Ethnic, linguistic and religious quality of democracy, legal origin, and prevailing culture fractionalization do not show any robust show strong associations with gender equality in some relationship with the percentage of female- studies but not in others. The alleged role of socialism in managed firms promoting gender equality is likewise confirmed in some studies but rejected in others. This body of work motivated One view in the literature is that greater ethnic, linguistic the analysis of the relationship between the percentage and religious fractionalization can lead to civil conflict of female-managed firms in a country and the quality of and social exclusion, and that women tend to suffer democracy measured by the “Polity” variable from the disproportionately from such situations. However, this Polity IV database as well as the legal origin of countries body of work is in its infancy and much more work is (English, French and Socialist). Some evidence was found needed to better understand the forces, if any, at play. Using of greater women’s participation in management in data from Alesina et al. (2001), we analyzed the relationship countries with better democracy and in Socialist countries between fractionalization along ethnic, linguistic and versus the rest. However, these results are not robust and religious lines and women’s participation in management. they disappear (become statistically weak) once differences There is no evidence of any significant correlation between in gender disparity in education level across countries any of the fractionalization measures and the percentage of are controlled for. Figure 3 illustrates the point for the firms with female managers. For example, moving from the democracy variable. One possibility here is that democracy 25th to the 75th percentile value of ethnic fractionalization Figure 3 Quality of democracy and women’s participation in management when gender differences in education levels are taken into account Without any controls Controlling for gender parity in education 40 20 LAO MNG MNG LAO MNG BEN BLR PHI BLR IDN NIC PHL NIC HND LWI VEN VEN DIA POL HND 30 10 PCL VNW LVA UKR UKR MLI Firms with a female Firms with a female BEN BGR top manager (%) top manager (%) VNM BGR KAZ DOM MNW ROM BOL PAN KAI EST KGZ KOZ PRY PRY TCO EST LMN SLE BOL CAF HPL PIT ZAR MLI MDA TTO RWA 20 RUS SVK 0 ZWE RWA URY CHN RWS MDA CZE MKD SVK CTM NER CZE BRA ASO BEN CHL BRA CPV CHN ZWE GUY AIYIDNVLN BWA EOU NPL BWA CPV TJR TUR SRB MWI GTM SVN CPI ERI MEX CRI TGO SUR MEX LTU CWR PERVIE ZAR ARM PER HUN ETW AGO LIZE SWR ARM LTU HUN CAF TUR CCL UZB TJK COL BFA NER DOM 10 CMR ARG -10 ETH EUW LKA ERI ARC TCD AZE CHL BGD AZE BGD CHL IRQ YEM KSV 0 -20 -10 -5 0 5 10 -15 -10 -5 0 5 10 Quality of democracy (Polity) Quality of democracy (Polity) coef = .02133123, (robust) se = .2152946, t= -.1 Source: Enterprise Surveys (various years) and Polity IV database (various years). Note: The graph is a partial scatter plot obtained of residuals obtained after controlling for the level of gender parity in education (taken from United Nations, 2005 values) as defined above. 3 is associated with a decrease in the female-managed firms firm-size and the percentage of female managers (confirmed by 1.9 percentage points, statistically insignificant at in the data). Second, without any controls, firm-size and the the 10 percent level. Controlling for income level, the percentage of female-managed firms are inversely correlated corresponding change is actually an increase although of a but this correlation is quantitatively small and statistically mere .12 percentage points and statistically insignificant at insignificant at the 10 percent level. However, controlling the 10 percent level (figure 4). for income level or gender parity in education, the negative correlation between firm-size and the percentage of female- Percentage of firms with a female manager managed firms becomes much more negative, economically is higher in countries where firm-size is large and statistically significant at the 10 percent level. smaller To get a sense of the magnitude involved, controlling for income level and gender parity in education, a decrease The relevance of firm-size for gender related issues is a in firm-size from the 75th to the 25th percentile value relatively unexplored area. It is conceivable that women may is associated with an increase in the percentage of firms face less discrimination in the relatively large firms as these with a female top manager by about 4 percentage points, firms are more visible to the public and the law and therefore statistically significant at the 1 percent level (figure 5). more conscious of gender discrimination issues. However, it is also likely that competition for top managerial positions Women’s presence as top managers is higher may be higher in the larger firms and this may put women among the relatively smaller firms within at a disadvantage given they tend to lag behind men in countries education and experience. Hence, the issue of firm-size and gender is an empirical one. Here we focus on differences in Eliminating cross-country differences in firm-size by firm-size across countries while within country differences controlling for country fixed effects, the probability that are analyzed below. Firm-size is defined as the (log of) a firm has a female top manger decreases sharply and number of full-time permanent employees working at the significantly with firm-size. For example, for a typical firm at the end of the previous fiscal year. Cross-country data country in our sample, the percentage of female-managed show two results. First, firm-size is positively correlated with income level and also with gender parity in education. Both Figure 5 these correlations imply that failure to control for income Controlling for income and level and/or gender parity in education across countries the level of gender parity would impart a positive bias to the relationship between in education, firm-size and women’s presence in top Figure 4 Social exclusion and women’s management are strongly and presence in management do not inversely correlated show any significant correlation 20 VCT LAO BEN BHSD 20 IDN MNG NIC BLR VCT PHL MNG VEN 10 top manager (%, residuals) LAO POL HND UKR VNM Firms with a female PHL MLI LVA NIC BGR HND IDN BLZ BLR VEN BHS BEN CRD ROM BOL 10 top manager (%, residuals) POL TLVA BRB KAZ EST PRY VNM UKR DMATGO LCA PAN KGZ SLV CAI Firms with a female 0 NPL TTO KNA ZAR KGZ BLZ RWA SRW ETH MLI BGR MKD CZE CHN GTM ROM EST KAZ NER MDA RUS PRV LCV BOL BRB MAI CPV BEA AGO TCD BRA MDA BWA GUY URY MWI TJK TUR NPL ERI CRI MEX 0 GUY MWI ZAR TGO CMR SVN PER URY RUS MRD TTO CHN BRA SVK ETH UZR RTU HUN ECU GTM SUR OGLARM CZE CAF CBL NER TJK ATG UWA BRA SUR -10 YEM ARMUZB PER AGO MEX LTU BIH DOM ERI CMR ARG COL HUN TUR DOM AZE CHL -10 LKA BGD ARG BGD AZE IRQ CHL -20 -1 -.5 0 .5 1 1.5 -20 Firm-size (residuals) -.4 -.2 0 .2 .4 coef = 4.9029479, (robust) se = 1.4138428, t= -3.47 Social exclusion (residuals) coef = 3.8223338, (robust) se = 6.9433883, t= .55 Source: Enterprise Surveys (various years), United Nations (2005) and World Development Indicators, World Bank (various years). Source: Enterprise Surveys (various years), World Development Note: The figure is a partial scatter plot of residuals of firm-size (log of Indicators (various years) and Alesina et al. (2001). number of permanent full-time employees at the firm at the end of the Note: The figure is a partial scatter plot of residuals obtained after previous fiscal year; average values at the country level) and the residuals controlling for (log of) GDP per capita (PPP adjusted and at constant of the percentage of firms in the country with a female top manager. The 2005 International Dollars). “Social exclusion” variable is defined as the residuals are obtained by controlling for GDP per capita (PPP adjusted average of ethnic, linguistic and religious fractionalization as reported and at constant 2005 International Dollars) and the gender parity in in Alesina et al. (2001). The positive relationship shown in the figure is education as defined above. The relationship shown in the figure is statistically insignificant at the 10 percent level. statistically significant at the 1 percent level. 4 firms in the sample of small firms (less than 20 employees) Notes is higher than the same for the sample of medium firms (20 1. Results do not change much if we lag the education variable here to 100 employees) by 6.7 percentage points and by 11.2 by 15-20 years to account for the long drawn out education process percentage points compared with the large firms (more than prevalent in most countries. 100 employees) (figure 6). Gender issues are now coming to the forefront in References development debates. While providing more employment Alesina, Alberto, Arnaud Develeeschauwer, William Easterly, Sergio opportunities to women is essential, it is also important that Kurlat and Romain Wacziarg. 2003. “Fractionalization,” Journal of women do not get concentrated in low paying and vulnerable Economic Growth 8: 155-194. jobs. This note looks at the proportion of top managers in the Altonji, J. G. and R. M. Blank. 1999. "Race and Gender in the  private firms of developing countries who are women and Labor Market," Handbook of Labor Economics, Volume 3, Eds. O. how this proportion is related to income level of counties, Ashenfelter and D. Card. Amsterdam: Elsevier Science. gender disparity in education, firm-size, etc. Currently, Elson, D. 1999. “Labor Markets as Gendered Institutions: Equality, Efficiency and Empowerment Issues,” World Development 27(3), this proportion is low—about 19 percent of managers 611-627. are women. More work is needed to better understand Hausmann, R., L. D. Tyson, and S. Zahidi.2006. The Global Gender Gap what drives women’s participation in management and its Report 2006, World Economic Forum, Geneva, Switzerland. consequences so that appropriate policies can be designed. Klasen, S. 2002. "Low Schooling for Girls, Slower Growth for All? Cross- Country Evidence on the Effect of Gender Inequality in Education on Economic Development," World Bank Economic Review 16(3): 345-373. Figure 6 Female managers are more common among the relatively smaller firms 25 21.6 20 Firms with a female top manager (%) 14.9 15 10.4 10 5 0 Small firms Medium firms Large firms Source: Enterprise Surveys (various years). Note: Small firms are those with less than 20 employees. Medium firms have between 20 and 100 employees and large fimrs have more than 100 employees. The Enterprise Note Series presents short research reports to encourage the exchange of ideas on business environment issues. The notes present evidence on the relationship between government policies and the ability of businesses to create wealth. The notes carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this note are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. 5