Gender, enterprise ownership, and labor allocation in MENA: the roles of Islam, oil, and government policies

Gender, enterprise ownership, and labor allocation in MENA: the roles of Islam, oil, and government policies

This paper documents a relatively low share of women among small and medium enterprise (SME) owners in the Middle East and North Africa (MENA). This phenomenon appears to be related to the low female labour force participation (LFP) rates commonly observed in the region. However, the connection is not straightforward because the rates of large firm ownership by women in MENA are comparable and sometimes higher than some other world regions.

To take a step toward understanding this puzzling pattern, the authors start with a framework that takes account of economy-wide interactions between firm ownership, employment, and outside options. They then use a unique cross-country micro dataset and a two-level model to separate out the role of individual characteristics from the influence of country conditions.

The first-level micro analysis suggests that the young age structure of MENA population helps explain part of MENA women’s low participation and low SME formation. At the second level, it is found that the prevalence of conservative religious culture, particularly the cultural and legal rule that husbands are financially responsible for their families’ expenses, rather than sharing responsibility jointly with their wives, may be a key factor that helps explain the pattern of labour allocation. In addition, lack of government effectiveness, the relative closed-ness of

MENA economies, and the gap between educational attainments of women and men in the past have also contributed to women’s low LFP and SME ownership. These are all policy areas in which governments can make a difference.

The paper also explores the role of a number of other factors and show their roles in labour allocation, though they do not help explain the current weaknesses in patterns of participation and employment in the region. One very notable finding among these is that, in contrast to the results of many other studies, resource rents don’t seem to be responsible for low LFP and small firm formation by MENA women. Quite to the contrary, they seem to have helped raise both of these outcomes in the oil-rich countries of the region. This sharp difference in findings is attributed to the closer cross-country comparability of the data and the micro-based approach.

 

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