Paper short abstract:

With increasing female enterprises in India, we examine whether technology adoption can reduce gender productivity gap for enterprises. We find ICT use for marketing, communication and finance significantly increases productivity of female-owned informal enterprises, overcoming traditional barriers.

Paper long abstract:

South Asia has one of the lowest female labour force participation (LFP) rates globally. India has seen a gradual increase in female LFP in the last decade, largely driven by self-employment. Interestingly, while a larger proportion of self-employed women are unpaid workers, the share of women enterprise-owners increased at a higher rate between 2017-18 and 2023-24, though the change is not uniform across states. We hypothesise that increasing productivity of small-businesses owned by women could be crucial in narrowing the gender employment gap. We particularly examine whether access to and usage of modern digital technology has a higher productivity-increasing effect on female-owned enterprises. This study contributes to the literature on low female LFP, entrepreneurship and technology adoption, and regional disparities.

In India, over 90 percent of the firms are informal. We utilise nationally representative Unincorporated Enterprise dataset (2022-23) with granular information on ICT adoption for over 400,000 firms. Though the proportion of internet users is low, number of internet subscribers has grown by 14 percent annually in the last decade.

The results suggest that average productivity of female-owned enterprises is approximately 40% of that of males. However, adopting ICT for marketing, communication, and finance can significantly narrow the productivity gap. Sector-specific analysis of apparel manufacturing and retail trade indicates that ICT adoption enables female entrepreneurs to access new markets, streamline financial transactions, and facilitate procurement of raw materials. This can help overcome traditional barriers for women entrepreneurs, like limited spatial mobility, thereby enhancing their productivity and encouraging female LFP.