Integration Costs and Missing Women in Firms

Where social norms favor gender segregation, firms may find it costly to employ both men and women. If the costs of integration are largely fixed, firms will integrate only if their expected number of female employees under integration exceeds some threshold. Motivated by a simple model of firm hiring, we develop a methodology that uses the distribution of female employment across firms to estimate the share of firms with binding integration costs and counterfactual female employment at all-male firms. We validate our approach using administrative data and unique policy variation from Saudi Arabia. We provide suggestive evidence that integration costs reduce aggregate female employment. Using survey data on manufacturing firms in 65 countries, we find significant integration costs in the Middle East, North Africa, and South Asia but not in other regions. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.