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Second-order gender effects: the case of U.S. small business borrowing cost

Research output: Contribution to journalJournal article

Published

Journal publication date05/2012
JournalEntrepreneurship Theory and Practice
Journal number3
Volume36
Number of pages21
Pages443-463
Original languageEnglish

Abstract

Gender-based differential treatment of business borrowers has been illegal for decades now. Therefore, any remaining gender effect is likely to be more subtle than before and second order in nature. Using 1,577 small businesses from the 2003 National Survey of Small Business Finances by the Federal Reserve Board, resolving the gender assignment problem, and isolating the supply effects, our tests detected a second-order gender effect in U.S. small business borrowing cost. Specifically, lenders charge female sole proprietorships an average of 73 basis points higher than male sole proprietorships. The methodology also ameliorates an interpretation problem common to first-order gender effects.