Measuring women's economic inclusion in the global South: development and validation of the WEPI

What the paper says

Purpose The present study aims to develop and validate a Women's Economic Participation Index (WEPI), constructed from the weighted aggregation of factors extracted through exploratory factor analysis. Using this index, the study empirically assesses its explanatory power with respect to external outcomes associated with female entrepreneurship, employing women's total early-stage entrepreneurial activity (TEA) as the dependent variable. Design/methodology/approach The WEPI was constructed using principal component analysis (PCA), applied to 16 variables grouped into four dimensions: wealth and income, labor market participation, leadership and wage disparities, and domestic violence. Data was obtained from the World Bank and the Fraser Institute. The index was computed for 99 countries in the Global South, and its statistical adequacy was confirmed through Bartlett's test and the Kaiser–Meyer–Olkin (KMO) measure. To empirically validate the WEPI as an indicator of women's economic participation, two cross-sectional regression models were estimated using female TEA – from the Global Entrepreneurship Monitor (GEM) – as the dependent variable. Model 1 employs the WEPI as the main explanatory variable, whereas Model 2 decomposes the index into its four constituent factors. This strategy allows for assessing both the explanatory power of the aggregate index and the specific contribution of each dimension to variations in early-stage female entrepreneurship, thereby functioning as a test of the indicator's external validity. Findings The results show that countries such as Georgia, Mauritius and Peru achieved the highest WEPI scores, reflecting strong institutional commitments to gender equality. In contrast, countries such as Sudan, Guinea-Bissau and Niger recorded the lowest scores due to structural and legal barriers, limited access to education, and high levels of gender-based violence. The regression models confirmed the external validity of the WEPI as a measure of women's economic participation. In the first model, the aggregate index displayed a positive association with early-stage female entrepreneurship, indicating that more inclusive environments foster women's engagement in new business creation. In the second model, which decomposes the WEPI into its four dimensions, income, leadership, and wage disparities were positively associated with TEA, whereas domestic violence exhibited a negative effect. Together, these findings indicate that both the composite index and its individual dimensions capture relevant institutional factors that help explain female entrepreneurial engagement across the countries analyzed. Originality/value The originality of this study lies in the development of the WEPI, an indicator designed to measure the multiple dimensions that shape women's economic participation in the Global South. The WEPI combines institutional, labor market, leadership, and safety-related factors into a single instrument, enabling the identification of specific barriers that constrain women's entrepreneurship and economic autonomy. Beyond deepening the diagnosis of gender-based economic inequalities in low-income contexts, the index provides a comparative analytical tool capable of guiding more targeted policy interventions, revealing which dimensions – and in which types of countries – progress may yield the greatest impact on women's economic empowerment.