# **I. Introduction**

Despite substantial gains in the participation of women in entrepreneurial activity globally (Kelley et al. 2016), a well-documented gender earnings gap persists. Women are found, on average, to earn considerably less than men (IWPR, 2018). Sectoral segregation<sup>2</sup> is often cited as a key determinant of this earnings gap. Women tend to start businesses in different industries than men, and the sectors dominated by women typically earn less. This pattern is often referred to as horizontal segregation. For example, in many countries, female-owned businesses are concentrated in retail trade and services sectors (mainly health, education, and social services), which are characterized by lower investments and growth compared to manufacturing, construction and mining sectors (Rosa and Sylla, 2016). The digital revolution may exacerbate the divide with the gender gap in participation being most pronounced in the information and communications technology (ICT) sector (Kelley et al. 2016).

Labor economists who study the earnings gap in wages also document a pattern of vertical segregation, meaning that within the same sector, women also tend to earn lower wages than men. This has been attributed to hours worked as well as employment flexibility (e.g. Rose and Hartmann, 2004; Goldin, 2014), as well as discrimination. “Glass ceilings,” for example, are a form of vertical segregation in which men hold positions in a company with the highest pay and more authority. When looking at firms, gender pay gaps in wages are harder to explain given the scope of data that are currently available. Hence, in this paper, we will focus on horizontal segregation, but will document some evidence of vertical segregation in firm profits as well.

This paper investigates the horizontal dimension of sectoral segregation by studying global data on female and male enterprise owners who operate in industries that are typically dominated by the same and opposite sex. We use a dataset spanning 97 countries that was administered to enterprise owners, managers and employees that use the Pages feature on Facebook for their business. A Facebook Page is a public profile specifically created for businesses and other organizations. Unlike personal profiles, pages do not gain "friends," but "fans," which are people who choose to "like" a page. The data were collected as part of the December 2018 wave of the _Future of Business_ survey (FoB) which is a collaborative effort between Facebook, the World Bank and the Organisation of Economic Co-operation and Development (OECD). The most recent round of these data was specifically designed to look at potential correlates of sectoral choice and hence allows us the first opportunity to look at sectoral segregation among firms across the world.

In the sections that follow, we label female enterprise owners who enter and operate in male-dominated sectors as “female crossovers” and those who remain in more traditional female sectors the “female noncrossovers.” We begin by testing the hypothesis that female crossovers make higher returns than female non-crossovers. We find that some of the earnings gap can indeed be explained by sector choice. On average, women who operate in male-dominated sectors make 66 percent higher profits than women who

> 2 The terminology “occupational segregation” is perhaps more widely understood to encapsulate gender segregation in the workplace, that describes the pattern that <mark>women and men still tend to work in different sectors and jobs</mark> . However, since the focus of this paper is on firms operating in different sectors and not on occupations, per se, we refer to the term as “sectoral segregation” to avoid any ambiguity.

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