Informal economy for women entrepreneurs in developing economies: a sad economic end?

Abstract

Purpose Women entrepreneurs in the informal economy (IE) are expected to experience a different trajectory and worse performance than men due to the societal context in which they operate (e.g. norms and culture). This paper aims to examine the validity of this assumption for women entrepreneurs in small firms (with up to five employees) in a developing country, focusing on two key aspects: (1) the desired trajectory of women entrepreneurs, considering their future preferences and those of their business; (2) Performance measured by sales revenue per hour worked (a fairer metric given the disparity of family responsibilities comparing to men) and the difficulties they face in managing their businesses. Trajectory, performance and management difficulties are compared with those of men in the same situation. Design/methodology/approach The authors use a unique-in-time database containing 67,580 entrepreneurs in Brazil comparing women and men entrepreneurs in the IE. The OLS estimates are accompanied by instrumental variable estimates to show that the main results are robust. Findings Women entrepreneurs do not have a different preference about their future or the future of their businesses compared to men entrepreneurs. Moreover, these women entrepreneurs outperform in sales revenue (by hours worked) and do so without encountering differences from men in managerial difficulties. Research limitations/implications This study has some limitations. Reliable firm-level data on informal firms are scarce, constraining the possibility of cross-country aggregation and comparative analysis. Moreover, the reliance on a single survey (ECINF 2003) precludes longitudinal designs that could use fixed effects to control for unobserved heterogeneity and track firm dynamics over time. In addition, the data set focuses on microenterprises (up to five employees) and lacks detailed industry information. Future research could benefit from broader databases and experimental approaches to better capture gender-related preferences and mechanisms shaping the behavior of informal firms. Practical implications This study also offers practical implications for policy. The strong performance of women entrepreneurs in the IE – despite structural barriers – suggests significant untapped potential. Policymakers should expand access to microfinance, simplify business formalization procedures and strengthen financial literacy through targeted programs. Complementary social policies, including subsidized childcare and flexible work arrangements, can help alleviate time-related constraints. Supporting women-led cooperatives may further enhance collective resilience and bargaining power. More broadly, entrepreneurship policies should acknowledge the realities of informality and adapt as gender roles evolve, promoting inclusive and sustainable economic development. Social implications Based on these results, although the context forwards for entrepreneurship in the IE, the authors cannot consider the IE as a sad economic end for women. Originality/value This study contributes to the literature in two different ways: (1) investigating future preferences empirically could account for the distinct paths taken by women and men entrepreneurs in the IE; (2) reemphasized that women entrepreneurs achieve better performance compared to male entrepreneurs in the IE. Although the context (norms/culture) is unfavorable, the economic result remains positive. Thus, the good revenue performance can be reanalyzed alongside the factors that justify women’s participation in the IE. Models investigating women entrepreneurs in developing countries should differentiate this importance in their analyses.