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Gender equality in the workplace: The effect of gender equality on productivity

growth among the Chilean manufacturers

Article  in  The Journal of Developing Areas · January 2016

DOI: 10.1353/jda.2016.0001

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 Gender Equality in the Workplace: The Effect of Gender Equality on Productivity Growth among
Chilean Manufacturers

Ruohan Wu
Alabama State University. USA
Corresponding author; email: rwu@alasu.edu

Xueyu Cheng
Clayton State University, USA

Abstract

This paper empirically studies the correlation between gender equality, productivity, and employment
among Chilean manufacturing firms from 2001 to 2007. A semi-parametric method is used to estimate
productivity. We consider four types of employees: executives and specialized production workers,
identified as high-skill employees; and administrative staff and auxiliary production workers, as low-skill
employees. The majority of the observed employees are male; therefore, we study gender equality through
the female labor-force participation rate. Through simultaneous estimation, it is found that for small firms
with less than 50 employees, higher female labor-force participation among high-skill employees
significantly increases a firms’ productivity. For larger firms with more than 50 employees, only better
gender equality among the low-skill employees improves productivity. A more equalized distributed
workforce between female and male workers does significantly lead to faster productivity growth, but it
depends on the size of the firm and specific types of employees.

Keywords: Chile manufacturers; gender equality; productivity; firm size; high-skill employees; low-skill
employees

JEL codes: C51; J01; J16; O14

I. INTRODUCTION

Economic development and modernization have had a profound influence on the lives of both men and
women during the past century. The 20th century witnessed the withering of traditional gender segregation
as women started to make major contributions in the labor force, education systems, academics, and public
events. However, many gender gap issues, such as sex discrimination, persist in many businesses. The
“glass ceiling” for female workers is a subtle yet strong barrier that keeps women from moving up the
corporate hierarchy. This term was first used by Carol Hymowitz and Timothy Schellhardt in their article,
“The Glass Ceiling: Why Women Can’t Seem to Break the Invisible Barrier that Blocks Them from the
Top Job”, which was published in the March 24, 1986 issue of The Wall Street Journal. According to this
article, female executives in most industries are in non-operating areas such as personnel, public relations,
or, occasionally, finance specialties that seldom lead to the most powerful top posts; they are blocked
outside of the business mainstream. Therefore, promoting gender equality, especially equal treatment of
male and female employees in the workplace, has been receiving intensive attention in economic studies as
well as business management.

Unequal benefits for different genders on the same level create hostilities in the workplace and costly
human resource management. For female employees, too many male co-workers may cause inconvenient
work surroundings, while too many male supervisors may present obstacles or delays to promotions. A
more equalized gender distribution in the workplace offers more hospitality and professionalism, which
also guarantees a healthy career path. Consequently, this improves workers’ efficiency and their motivation.
Thus, enforcing gender equality is traditionally considered an important aspect of business success and
productivity improvement (Sainsbury 1996; O’Connor, Orloff & Shaver 1999; Inglehart and Norris 2003).

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 Human talent, i.e. the skills, education level, and productivity of both females and males, is one of the
most important determinants of a country’s competitiveness and has thus been the topic of countless studies.
Improving gender equality in the labor force has been achieved in many fields, such as economics, business
management, sociology, and anthropology. There are multiple strong explanations for this equality
improvement, and technological progress, for instance, is one of them. Widely spread internet usage has
even created the postmodern keyword of “cyberfeminism”; it suggests females are increasingly empowered
through information and communication technologies. Improving gender equality, in most cases raising the
benefits of women and girls, symbolizes modern economic growth, especially for developing economies
such as Chile.

In this study, we analyze Chilean manufacturing firms from 2001 to 2007. Gender equality is defined
as evenly distributed participation in the labor force between male and female employees. We examine
whether gender equality leads to faster productivity growth. Furthermore, we study gender equality among
different types of employees and, as a firm grows, their effects on promoting productivity. Two indicators
measure gender distribution in this paper. One is the female labor force percentage; the other is gender
equivalence, or how much the female labor force percentage deviates from 50%. Four types of employees
are considered: executives, production workers with specialized skills, administrative staff, and auxiliary
production workers. The first two represent high-skill management and production employees, while the
latter two represent low-skill management and production employees.

To and monitor their long-term performance, we chose firms that continuously operated from 2001 to
2007 and constructed a balanced panel dataset. These firms feature larger production and size. However, no
difference in the gender distribution is detected between continuous and non-continuous firms. The data
show there is still severe gender inequality within the Chilean manufacturing industry. Of the sampled
employees, 80% are male. Only 11% of the observed firms hire more female employees than male
employees, while 8% have purely male employment.

To estimate firms’ productivity, we use a semi-parametric method that successfully removes the
endogeneity and reduces bias estimation. Furthermore, this paper is one of the first to study the influence of
gender equality on productivity growth, and how the firm’s size and its employees affect the influence. The
result turns out to be complicated. We find that among the Chilean manufacturers, the influence of gender
equality varies as a firm’s size expands. For those firms with less than 50 employees, higher gender
equality among high-skill employees significantly increases their productivity. For those firms with more
than 50 employees, however, only higher gender equality among low-skill employees encourages growth.

The remainder of the paper is laid out as follows. Section 1 provides an introduction and literature
review. Section 2 lays out the data and provides a brief description of the research methodology. Section 3
presents the empirical test results, and Section 4 discusses our findings. Section 5 concludes the paper.

Gender Equality and Manufacturing Industries in Chile

Chile presents an interesting case to study. The lives and rights of women in Chile have been through
many improvements throughout the 20th century. Chilean women are increasingly involved in public life;
women’s education achievements, job opportunities, and legal rights have been greatly enhanced,
especially since 1990, when the country became a democracy. In 1999, Chile reformed its national
constitution to include specific provisions upholding gender equality and explicitly prohibiting gender-
based discrimination. It is also one of the few countries to have had a female president, who was elected in
2006.

Despite this impressive progress, however, the level of women’s participation in Chile’s economy is
still among the lowest in Latin America. Chilean women still face many challenges, including low
workforce participation and an income gap. According to the 2007 World Bank report, “Chile: Reconciling
the Gender Paradox”, women earn 20% less money than their male coworkers when performing the same
work. Overall, there is a 33% gap between women and men’s salaries.

The Chilean government has been enacting legislation to ensure equal payment between men and
women. Meanwhile, women have had more opportunities for post-secondary education and getting to know

2
their legal rights in the workplace. Improving gender equality has been a critical policy subject for Chile to
promote its economy. Surprisingly, considering such an interesting topic, very few works have been done
to study gender equality within Chilean businesses, especially the manufacturing industry.

Chile is one of the top industrialized Latin American countries. It also stands among the richest
countries on the South American continent. Chilean manufacturing industries are in great compliance with
a wide spectrum of global standards and certificates. Most of the manufacturers fall into the following
categories: food processing, beverage and tobacco, timber and furniture, metallic products, rubber and
plastic, paper and printing, and textiles. According to a 2012 survey (“Cuentas Nacionales - Evolución de la
actividad económica en el año 2011”) conducted by the Central Bank of Chile, the manufacturing industries
account for 11% of the country’s GDP. Among these subcategories, the food-processing sector accounts for
2.6% of the GDP, while the metallic production and rubber/plastic sectors each account for 1.7%. Therefore,
a finding that effectively stimulates the growth of Chilean manufacturing industries is also one that greatly
promotes this country’s national competitiveness.

Literature Review

Gender equality studies have been conducted consistently. In both Wright, Baxter & Birkelund (1995)
and Kraus and Yonay (2000), the authors looked into the gender gap in workplaces across different
countries and how the variations in the gaps can be attributed to discrimination against female workers.
Gender equality in the labor market has also received considerable attention in the literature. Ridgeway
(1997) studied the reasons for the persistence of gender stereotypes and sex segregation in workplaces.
After a long period of stagnation of wage convergence, the gender gap in wages narrowed substantially in
the 1980s (Blau and Beller 1988). According to Hegewisch et al. (2010), after steady progress toward more
integrated occupations in the 1970s and 1980s, integration progress has stagnated since the mid-1990s.

Besides labor force participation, there are different ways to measure gender equality. In Olgiati and
Shapiro (2002), equality is defined as equal treatment in the workplace in terms of rights, benefits,
obligations, and opportunities. The gender wage gap, or the wage difference between males and females,
was discussed extensively in O’Neil (1985), Peterson and Morgan (1995), Blau and Kahn (1994, 1996,
1997), Gardeazabal and Ugidos (2005), and Dong and Zhang (2009). Differentiated male-female roles
within production (Hellerstein and Neumark 1999), poverty rate (Findlay and Wright 1996), schooling
(Munshi and Rosenzweig 2006), and family responsibility (Kumlin 2007) all present alternative insights
into gender inequality issues. The common conclusion from these studies is that gender inequality attributes
to lagged-behind resource allocation and hence hinders social-economic development.

The process and means of gender equality improvement, therefore, has become a popular topic.
Numerous studies (Olgiati and Shapiro 2002; Inglehart and Norris 2003; Bolzendahl and Myers 2004;
Verloo and Pantelidou 2005) have discussed in depth how to enhance gender equality and its influence
upon the world of professionalism. As far as progress in gender equality is concerned, the past three
decades is one of the most critical eras for American women. Women made great progress in the labor
market as well as inside the household (Blau 1998). The female labor-force participation rate and labor
force attachment increased sharply, while occupational segregation and the gender gap in earnings both
declined substantially. Within families, the relative wages of wives went up; wives reduced their
housework hours, while their husbands spent more hours on housework. Women caught up with or even
surpassed men in education (Bae et al. 2000). Women now are more likely than men to graduate from high
school and earn a college degree.

II. DATA DESCRIPTION AND RESEARCH METHODOLOGY

The firm-level data used in this analysis is from the Encuesta Nacional Industrial Annual (ENIA), a
national annual industrial survey conducted by the Instituto Nacional de Estadisticas Chile (INEC) or
National Statistics Institute of Chile. The dataset contains information on Chilean manufacturing firms from
2001 to 2007, with 4,000 to 5,000 observations per year. The INEC includes those firms that began

3
operating during that year while excluding those that stopped for any reason. Each firm is assigned a
specific identification number, allowing its activities to be tracked over time.

We compile a balanced panel dataset. In other words, only those firms with continuous information for
these variables from 2001 to 2007 are included in the sample. After sorting out the sample firms from the
discontinuous ones, there are 2,264 observations per year and 15,848 in total. This is a subset of the much
larger population of 34,973 firms covered by the ENIA survey. Table 1 compares the selected sample with
the entire ENIA dataset. “Average Size” reports the average number of total contracted employees.
“Average Production” is the average value of production. “Average Revenue” is the average sales revenue.
The continuously operating firms are generally much larger in size and production capacities.

The table also reports gender distribution statistics. In this paper, we look into four types of employees:
executives, production workers with specialized skills, administrative staff members, and auxiliary workers
assisting production activities. The first two types, executives and specialized workers, require specialized
skills in management and production and therefore represent high-skill workers. Meanwhile, the latter two
types, staff and auxiliary workers, do not need much expertise gained from long-term training and thus
represent a low-skill requirement in management and production. Therefore, we use these types of
employees to indicate high- and low-skill management and production workers respectively. Under each
employment type, the percentage of the female workers measures gender distribution. We find that there is
not much difference in the female labor force percentage between our sample and the entire original data
set. Statistically speaking, they share a quite similar gender distribution under each employment type. The
continuous firms are significantly bigger in size, but they do not necessarily represent a difference in
gender distribution.

Table 1: Representativeness of the Sample – Firms in 2001 and 2007

2001 2007

Statistics Original Sample Original Sample

Number of Firms 4,885 2,264 4,538 2,264

Average Size 67 82 84 97
Average Productiona 5.4 7.4 13.8 16.2
Average Revenuea 5.2 7.1 13.4 15.7

Average Female Executive % 21.5% 20.2% 23.1% 22.4%

Average Female Specialized Worker % 14.3% 12.7% 13.8% 13.3%
Average Female Administrative Staff % 45.8% 44.9% 46.2% 46.3%
Average Female Auxiliary Workers % 8.2% 7.9% 7.9% 7.8%
Source: ENIA (Annual National Industry Survey) Dataset, National Institute of Statistics of Chile.
a
: measured in millions of CLP (Chilean Pesos).

Gender Distribution

As mentioned above, we focus on four types of employees: executives, specialized workers,

administrative staff, and auxiliary workers. Under each type, we construct two variables to measure gender
distribution. The first is the female labor force percentage (LF%), which is defined as:

female LF% = female employees / (female employees + male employees) (1)

The other variable is gender equivalence, which is defined as

gender equivalence = 1-|female LF% – 0.5|, (2)

and it is between 0.5 and 1.

4
 We further divide our entire sample into three groups according to the distribution of the firms’ sizes,
namely their total number of employees. We define “big firms” as those firms with more than 50
employees. Those firms with between 20 and 50 employees are “medium firms,” while “small firms” have
less than 20 employees. We then look into how this size difference affects the relationship between gender
equality and productivity.

Table 2 compares the female labor force percentage across the different size groups. As we can see,
male workers are still dominating the work force in Chilean manufacturing industries. Only a very few
firms (around 10%) hire more female workers. A quarter of the big firms have 100% male executives; 40%
of the medium and small firms have purely male executives. About half of the firms, no matter what size,
have purely male specialized workers.

Table 2: Distribution of Female Labor force Percentage (LF%) across Difference Firm Sizes

Big Firms Medium Firms Small Firms

(size ≥ 50) (20 ≤ size < 50) (size < 20)
Female LF% among:: Numbe Percenta Numbe Percenta Numb Percenta
r r er
All Employees
> 0.5 699 12.4% 470 9.3% 594 11.5%
∈ (0, 0.5) 4,801 85.1% 4,268 84.3% 3,808 74.1%
=0 144 2.5% 324 6.4% 740 14.4%

Executives
> 0.5 179 3.2% 324 6.4% 496 9.7%
∈ (0, 0.5) 521 9.2% 787 15.6% 762 14.8%
=0 1,322 23.4% 2,059 40.7% 2,067 40.2%

Specialized Workers
> 0.5 440 7.8% 250 4.9% 310 6.0%
∈ (0, 0.5) 2,361 41.8% 686 13.6% 440 8.6%
=0 2,507 44.4% 2,826 55.8% 2,401 46.7%

Administrative Staff
> 0.5 1,026 18.2% 1,749 34.6% 1,786 34.7%
∈ (0, 0.5) 4,100 72.6% 2,021 39.9% 903 17.6%
=0 390 6.9% 780 15.4% 913 17.8%

Auxiliary Workers
> 0.5 138 2.5% 103 2.0% 128 2.5%
∈ (0, 0.5) 1,034 18.3% 226 4.5% 108 2.1%
=0 2,952 52.3% 1,757 34.7% 845 16.4%
Source: ENIA (Annual National Industry Survey), National Institute of Statistics of Chile.
a
: Percentage measures the ratio between Number and the total number of firms in each size group.

Among the administrative staff, this unequal gender distribution seems to be less severe among the
medium and small firms, as 35% of them hire more female staff than male staff. However, the majority of
the auxiliary workers are male. Over half of the big firms still have purely male auxiliary workers. This
finding also exhibits the prevailing sex segregation among Chilean manufacturers. Most of the female
employees are stranded in low-level, non-production positions. The current Chilean business system still
greatly advantages men over women in material resources, status, authority, and power.

Therefore, the gender distribution in Chilean manufacturers is still highly unequal. No matter how
many employees a firm has and no matter which employment type is considered, male workers constitute
the absolute majority of the labor force. Compared among the three different sizes, there is no obvious
pattern of gender distribution within certain employees. In our entire sample, only 20% of the workers are

5
female, and the firms’ average female labor force percentage is 22%. An increase of either one of the two
indicators – female labor force percentage or gender equivalence – means more female workers and a more
evenly distributed labor force.

Productivity Estimation

In this study, we use the Olley-Pakes (OP) method to estimate manufacturing productivity. The OP
method is a semi-parametric method, which effectively removes the simultaneity and endogeneity during
the estimation. It uses a typical Cobb-Douglas production function:
𝛽𝛽 𝛽𝛽 𝛽𝛽
𝑌𝑌𝑖𝑖𝑖𝑖 = 𝐴𝐴𝑖𝑖𝑖𝑖 𝐿𝐿𝑖𝑖𝑖𝑖𝑙𝑙 𝐾𝐾𝑖𝑖𝑖𝑖𝑘𝑘 𝑀𝑀𝑖𝑖𝑖𝑖𝑚𝑚 exp (𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 ∑ j female LF%j it + 𝜀𝜀𝑖𝑖𝑖𝑖 ), (3)

For firm i at time t, A it is productivity, L it is labor, M it is materials cost, and K it is capital. Representing
all employee types, j = executives, specialized workers, administrative staff, and auxiliary workers. Thus
𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 is the coefficient vector of the female labor force percentages of the four employee types. Log
linearizing (3) yields:

y it = a it + 𝛽𝛽𝑙𝑙 l it + 𝛽𝛽𝑘𝑘 k it + 𝛽𝛽𝑚𝑚 m it + 𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 ∑ j female LF%j it + 𝜀𝜀𝑖𝑖𝑖𝑖 (4)

𝜀𝜀𝑖𝑖𝑖𝑖 = 𝜔𝜔𝑖𝑖𝑖𝑖 + 𝜂𝜂𝑖𝑖𝑖𝑖 , (5)

All lower-case input indicators are the logarithm of the corresponding upper-case ones (e.g., l it = log
L it ). Term εit is composed of two elements: a firm-specific productivity shock 𝜔𝜔𝑖𝑖𝑡𝑡 , which is known by the
firm but not captured in the dataset, and white noise 𝜂𝜂𝑖𝑖𝑖𝑖 , which is neither known to the firm nor captured in
the data. The unobserved productivity 𝜔𝜔𝑖𝑖𝑖𝑖 is assumed to follow a 1st order Markov process.

The estimation includes two steps. First, the unobserved productivity must be rewritten as a function of
investment and capital to obtain consistent estimates of the coefficients on the input variables 𝛽𝛽𝑙𝑙 , 𝛽𝛽𝑚𝑚 , and
𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 . Second, a semi-parametric method is used to separate capital elasticity 𝛽𝛽𝑘𝑘 from the firm-level
investment decision. Following Olley and Pakes (1996), we assume that 𝜔𝜔𝑖𝑖𝑖𝑖 is observed before the firm
makes any profit-maximizing choices; the investment decision is used as intermediate input, which
increases monotonically with productivity conditional on capital input. Then, the inverse of the investment
decision function depends only on observable capital and intermediate inputs. Thus its nonparametric
estimate can control the unobservable productivity shock and remove the simultaneity bias.

The traditional ordinary least squares (OLS) linear estimation ignores the fact that firms choose their
inputs based on their knowledge of 𝜔𝜔𝑖𝑖𝑖𝑖 , the potential productivity shocks. Based on a Cobb-Douglas
production function, it tends to overestimate the coefficients of production factors, such as labor input and
material costs, and underestimate that of the capital input. By removing the bias in these coefficients, the
OP method achieves a more accurate estimated productivity. It corrects the endogeneity of input choices
with respect to productivity shocks.

Table 3 compares the distribution of productivity across the three different size groups. Unsurprisingly,
big firms (size > 50) feature a more left-skewed productivity distribution; 48% of them have productivity
between 1 and 1.5. Medium (size between 20 and 50) and small firms (size < 20) have relatively more
firms with their productivity lower than one. The smaller a firm is the lower productivity it could only
expect. The t-tests confirm the productivity difference across the different size-groups.

6
 Table 3: Distributions of Productivity across Difference Sizes

Big Firms Medium Firms Small Firms

(size ≥ 50) (20 ≤ size < 50) (size < 20)
a it = log A it Number Percent Number Percent Number Percent
Total 5,644 5,062 5,142
a it < 0.5 102 1.8% 227 4.5% 445 8.7%
a it ∈ [0.5 1) 1,600 28.3% 1,867 36.9% 2,072 40.3%
a it ∈ [1 1.5) 2,705 47.9% 2,201 43.5% 1,789 34.8%
a it ∈ [1.5 3) 1,205 21.4% 754 14.9% 800 15.6%
a it > 3 32 0.2% 13 2.6% 36 7%

t-test: Big & Medium Firms Medium & Small Firms Small & Big Firms
p-value < 2.2e-16 1.5e-06 < 2.2e-16

III. EMPIRICAL TESTS

To study the relationship between gender equality and productivity, as well as how it can be affected
by a firm’s size, we follow the size group definition outlined in section II. Next, we implement
simultaneous estimation to measure the specific influence of the different gender variables on a firms’
productivity within each size group.

We conduct simultaneous estimation with the relationship between productivity and gender equality.
The structural simultaneous equation system is:

a it = 𝛽𝛽1 ∑ j female LF%j it-1 + 𝛼𝛼X it-1 + 𝜖𝜖 it ;

R (6)

a it = 𝛾𝛾1 ∑ j gender equivalencej it-1 + 𝛼𝛼X it-1 + 𝜖𝜖 it .

R

The explanatory variables are lagged by one period to avoid simultaneity. The logarithm of the
estimated productivity of firm i is a it . Representing all employee types, j = executives, specialized workers,
administrative staff, and auxiliary workers. 𝛽𝛽1 and 𝛾𝛾1 represent the vectors of coefficients on each gender
variable. Manufacturing characteristics, such as energy intensity, capital ownership structure, and value-
added rate, are captured in X it . The energy intensity is the ratio between energy (petroleum and diesel)
expenditure for industrial purpose and total production value. Foreign ownership measures what percentage
of the firm’s total capital is foreign owned. Value-added rate is the ratio between manufacturing value-
added and total production value, while 𝛼𝛼 is a vector of the coefficients on these manufacturing
characteristics.

We also consider the firm-level heterogeneity and conduct an estimation with firm-level fixed effect.
Table 4 and 5 report all the estimated coefficients of the gender variables under the different size groups. In
each table, Panel A includes 𝛽𝛽1 as the coefficient vector of the female LF% of the different types of
employees. Panel B includes 𝛾𝛾1 , which includes all the gender-equality coefficients.

Full Sample

Within the entire sample, a more balanced gender-composition in both specialized and auxiliary
workers leads to higher productivity. In Table 4, Panel A, increasing the number of female specialized
workers by 1% can increase a firm’s productivity by 9%, while a 1% increase in the number of female
auxiliary workers raises productivity by 17%. In Panel B, raising gender equivalence among specialized
workers by 1% increases productivity by 14%, while the same change among auxiliary workers increases
productivity by 21%. In Table 5, with firm-level heterogeneity being considered, the significance remains.
On the whole, a more equalized gender distribution among either high- or low-skill workers does enable a

7
firm to grow faster. Regardless of the firm size, our findings are consistent with traditional studies
promoting gender equality. Increasing gender equality in the workplace accelerates productivity growth.

Results by Firm Size

Firms are grouped as follows: big firms, with more than 50 employees; medium firms, with 20 – 50
employees; and small firms, with less than 20 employees. Among the big firms, a 1% increase in gender
equivalence among the administrative staff, a low-skill employment type, will increase productivity by
18%. A 1% increase in gender equivalence among the auxiliary production workers, the other low-skill
employment type, will increase productivity by 25%. A 1% increase in the number of female auxiliary
workers will increase productivity by 34%.

Among the medium firms, increasing the number of female executives by 1% increases productivity by
10%; another 1% increase in the number of female specialized workers increases productivity by over 11%.
Increasing gender equivalence among executives by 1% can increase productivity by 9%, and a 1% higher
equality among specialized workers leads to higher productivity by over 10%. Among those small firms
with less than 20 workers, a 1% increase in the number of female executives can increase productivity by
1.1%; a 1% increase in gender equivalence among the specialized workers will increase productivity by
88%.

Table 5, with firm-level heterogeneity being considered, shows that, when big firms achieve a 1%
increase of the percentage of female auxiliary workers, productivity will increase by 30%. A 1% increase in
gender equivalence among the auxiliary production workers will increase the productivity by over 22%. A
1% increase in gender equivalence among the administrative staff will increase their productivity by 19%.
Gender equivalence among low-skill employees significantly promotes the productivity of big-size firms.

Among the medium firms, increasing the number of female executives by 1% increases productivity by
around 11%; so do 1% more female specialized workers. Among the small firms, a 1% increase in the
female executive percentage can increase productivity by 0.9%; a 1% increase in gender equivalence within
the specialized workers can increase productivity by 63%. To sum up, among medium and small firms,
higher gender equivalence and female LF% among the high-skill workers can significantly raise
productivity.

Table 4: Simultaneous Estimation on Gender Equality and Productivity

Dependent Variable All Big Firms Medium Firms Small Firms

Firms (size ≥ 50) (20 ≤ size < 50) (size < 20)
a it = log A it (i) (ii) (iii) (iv)
A: Female LF%

Executives -0.019 -0.086** 0.101*** 0.011*

(0.027) (0.044) (0.038) (0.005)

Specialized Workers 0.084** 0.033 0.117* 0.061

(0.034) (0.052) (0.070) (0.084)

Administrative Staff -0.089 0.388 -0.021 -0.202***

(0.129) (1.375) (0.038) (0.055)

Auxiliary Workers 0.173*** 0.339*** -0.117* 0.025

(0.044) (0.069) (0.062) (0.089)

Energy Intensity -1.098** -1.059 -0.361 -0.931

(0.544) (0.889) (0.705) (1.386)

Foreign Ownership 0.208** -0.019 0.565*** 0.041

(0.093) (0.127) (0.127) (0.186)

8
 Value Added Ratio 0.137*** 0.067 0.220*** 0.155
(0.050) (0.076) (0.071) (0.106)

R2 0.130 0.113 0.115 0.185

B: Gender Equivalence

Executives 0.030 0.724 0.089** -0.054

(0.044) (2.303) (0.042) (0.135)

Specialized Workers 0.139** -0.012 0.105** 0.881***

(0.061) (0.048) (0.045) (0.182)

Administrative Staff 0.078 0.182*** 0.179 0.086

(0.048) (0.034) (0.514) (0.099)

Auxiliary Workers 0.206*** 0.253*** 0.155 -0.316

(0.069) (0.074) (0.134) (0.218)

Energy Intensity -1.045* -2.500*** -0.175 -0.388

(0.545) (0.567) (0.541) (1.375)

Foreign Ownership 0.239*** 0.024*** 0.268*** 0.049

(0.092) (0.003) (0.093) (0.177)

Value Added Ratio 0.122** 0.487*** 0.250*** 0.145

(0.050) (0.041) (0.049) (0.104)

R2 0.125 0.111 0.149 0.109

Obs 13,584 4,787 4,388 4,409

*** ** *
Notes: All explanatory variables are lagged by 1 year. , and represent significance at 1%, 5% and 10%
respectively.

Table 5: Simultaneous Estimation on Gender Equality and Productivity (Firm-Level Heterogeneity)

Dependent Variable All Big Firms Medium Firms Small Firms

Firms (size ≥ 50) (20 ≤ size < 50) (size < 20)
a it = log A it (i) (ii) (iii) (iv)
A: Female LF%

Executives -0.032 -0.074* 0.109*** 0.009*

(0.027) (0.043) (0.038) (0.005)

Specialized Workers 0.080** 0.054 0.114* 0.049

(0.035) (0.052) (0.070) (0.084)

Administrative Staff -0.087 0.236 -0.022 -0.165***

(0.125) (1.345) (0.039) (0.056)

Auxiliary Workers 0.146*** 0.305*** -0.133** 0.057

(0.045) (0.068) (0.062) (0.087)

Energy Intensity -0.859 -0.339 -0.409 -0.689

(0.550) (0.922) (0.711) (1.347)

Foreign Ownership 0.137 -0.194 0.578*** 0.061

9
 (0.092) (0.126) (0.127) (0.180)

Value Added Ratio 0.121** 0.054 0.281*** 0.110

(0.051) (0.075) (0.073) (0.106)

R2 0.153 0.172 0.145 0.183

B: Gender Equivalence

Executives 0.010 1.456 0.092** -0.068

(0.044) (2.280) (0.042) (0.133)

Specialized Workers 0.116* -0.040 0.104** 0.633***

(0.063) (0.048) (0.045) (0.188)

Administrative Staff 0.078 0.190*** 0.056 0.159

(0.049) (0.034) (0.515) (0.097)

Auxiliary Workers 0.176** 0.225*** 0.174 0.293

(0.071) (0.074) (0.134) (0.214)

Energy Intensity -0.824 -2.158*** -0.050 -0.236***

(0.550) (0.568) (0.547) (1.345)

Foreign Ownership 0.163* 0.207*** 0.265*** 0.001

(0.092) (0.026) (0.093) (0.173)

Value Added Ratio 0.109** 0.463*** 0.257*** 0.069

(0.051) (0.041) (0.050) (0.104)

R2 0.148 0.129 0.161 0.190

Obs 13,584 4,787 4,388 4,409

*** ** *
Notes: All explanatory variables are lagged by 1 year. , and represent significance at 1%, 5% and 10%
respectively.

As for other explanatory variables, higher energy intensity decreases firms’ productivity. The more a
firm consumes energy, such as petroleum or diesel, the lower productivity it can expect. It also suggests
that higher energy efficiency leads to advanced productivity. Meanwhile, foreign-oriented firms with more
foreign-owned capital are also more productive; so are those firms creating more value added through their
production process.

Discussion

The mixed finding in the correlation between gender equality and productivity reveals important
findings. In addition, it tells an interesting story of a firm’s growth. At the beginning, when a firm is small
with low employment and production capacity, high-skill employees are its backbone, and they require a
friendly workplace. Specialized and well-trained production workers help promote manufacturing, raise
profitability, and bring the firm to the cutting edge of the industry. Splendid management skills create
highly efficient workplaces; employees are greatly motivated in a well-organized and administrated
environment. These are all necessary factors for a new firm to thrive. Thus, improving gender equality
brings out better performance among the high-skill employees, e.g. executives and specialized production
workers, and becomes the driving force for a small firm to accelerate its growth.

Later, when a firm becomes bigger with more employees and production, it should pay more attention
to gender equality in the low-skill employees. Advanced production and management techniques are the

10
focus of small firms; however, as it develops and matures, a big firm keeps growing only when its low-skill
employees are also in an equalized and friendly working environment. High gender equality in an evenly
distributed labor force encourages a friendly and efficient working atmosphere, and it can provide the firm
with sustainable production motivation. Ordinary employees, instead of the elites, are the primary
determinant of developing momentum for a big firm.

IV. CONCLUSION

This paper empirically studies how gender equality in different employees affects Chilean
manufacturers’ productivity, as well as how these effects vary among different-sized firms. It interprets
gender equality through two ways. One is female labor-force percentage rate; the other is how much this
rate deviates from 0.5. We use data captured through the ENIA, an annual industrial survey on Chilean
manufacturing firms from 2001 to 2007. A semi-parametric method is used to estimate productivity in
order to remove potential simultaneity and endogeneity.

We then conduct a simultaneous estimation to examine the relationship between productivity and each
type of gender equality. Through our tests, we find that gender equality does encourage productivity growth;
however, the results depend on the employment type and the size of the firm. We consider four types of
employees: executives and specialized production workers, both high-skill employees; and administrative
staff and auxiliary production workers, both low-skill employees. Among those firms with less than 50
employees, higher gender equality among the high-skill employees can significantly enhance
manufacturing productivity. In contrast, among those firms with more than 50 employees, only higher
gender equality among the low-skill employees can improve productivity.

We have contributed to the literature through multiple ways. Our findings provide insights into a firm’s
growth pattern. High-skill employees are the leading force of small firms, while big firms must consistently
secure the welfare of low-skill employees. In the real world, gender equality in the workplace remains an
important and complicated subject, and there is a lot of work ahead.

Our findings also provide important policy implications for Chile. To effectively promote the growth
of manufacturing firms, a typical method is to ensure gender equality in the workplace. Fair treatment and
healthy surroundings for the employees, needless to say, are always quite important. Various policies can
be enforced – for example, trainings on gender equality to the managerial and human resource personnel.
Such lessons among the managers and officers will educate them to be able to identify both obvious and
subtle gender discrimination cases and avoid them. In addition, providing quality child-caring facilities or
family leave policies for both fathers and mothers is also a good idea.

However, according to our findings, there should be different emphasis at different life phases of one
firm. When a firm is still small with relatively low employment, gender equality among high-level
employees should be highlighted. One good example is the firm’s propaganda strategy. Showcases of
successful female leaders, or emphasizing the superior welfare treatment among female specialists during
the hiring process, are very effective strategies. High-skill females will be attracted to the firm and help
balance the gender issue.

When a firm grows bigger and bigger, fair treatment among all the normal workers must be guaranteed.
Establish policies that strictly forbid any kinds of sexual harassment, that allow both male and female
workers to balance their work with their family lives, that ensure all workers get compensated and
promoted equally based on the same performance. Publicizing these efforts among low-level workers will
help others know the firm’s dedication and accept it as a role model in the business; it will then benefit the
marketing and operation of the firm, as well as its long-term growth.

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11
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Appendix A. Olley-Pakes Methodology

To estimate the productivity, we use a classic Cobb-Douglas production function:

𝛽𝛽 𝛽𝛽 𝛽𝛽 𝑗𝑗
𝑌𝑌𝑖𝑖𝑖𝑖 = 𝐴𝐴𝑖𝑖𝑖𝑖 𝐿𝐿𝑖𝑖𝑖𝑖𝑙𝑙 𝐾𝐾𝑖𝑖𝑖𝑖𝑘𝑘 𝑀𝑀𝑖𝑖𝑖𝑖𝑚𝑚 ex p�𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 ∑𝑗𝑗 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝐿𝐿𝐿𝐿%𝑖𝑖𝑖𝑖 + 𝜀𝜀𝑖𝑖𝑖𝑖 �, (3)
where for firm i at time t, A it is the manufacturing productivity, L it is labor input, M it is material cost, and
K it is capital input. Log linearizing (3), we have
𝑗𝑗
𝑦𝑦𝑖𝑖𝑖𝑖 = 𝑎𝑎𝑖𝑖𝑖𝑖 + 𝛽𝛽𝑙𝑙 𝑙𝑙𝑖𝑖𝑖𝑖 + 𝛽𝛽𝑘𝑘 𝑘𝑘𝑖𝑖𝑖𝑖 + 𝛽𝛽𝑚𝑚 𝑚𝑚𝑖𝑖𝑖𝑖 + 𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 ∑𝑗𝑗 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝐿𝐿𝐿𝐿%𝑖𝑖𝑖𝑖 + 𝜀𝜀𝑖𝑖𝑖𝑖 , (4)
𝜀𝜀𝑖𝑖𝑖𝑖 = 𝜔𝜔𝑖𝑖𝑖𝑖 + 𝜂𝜂𝑖𝑖𝑖𝑖 , (5)
Hereafter all the lower-case input indicators are the logarithm of the corresponding capital ones, e.g.
a it =log A it . Firm specific error term 𝜀𝜀𝑖𝑖𝑖𝑖 is composed of two elements: a firm-specific productivity shock 𝜔𝜔𝑖𝑖𝑖𝑖
that is known by the firm but not the econometricians, and a white noise 𝜂𝜂𝑖𝑖𝑖𝑖 that is unknown for both the
firm and the econometricians. In this paper the former one is the one that matters. According to Olley-
Pakes approach the unobserved productivity 𝜔𝜔𝑖𝑖𝑖𝑖 follows a 1st order Markov process. Meanwhile, a firm's
profit maximization yields an investment decision function I it which depends on capital k it and productivity
ω it . Specifically,
I it = I ( k it , 𝜔𝜔𝑖𝑖𝑖𝑖 ). (7)
The OP methodology includes two steps. First, by inverting the investment function in (10), the
unobserved productivity can be explained by investment and capital. Substituting the result back into (2),
we can then obtain the consistent estimates of the coefficients of variable inputs, namely 𝛽𝛽𝑙𝑙 and 𝛽𝛽𝑚𝑚 . Second,
we will separate capital elasticity 𝛽𝛽𝑘𝑘 from the investment decision. Following Pavcnik (2000), I assume
capital at t+1 is correlated with productivity expectation. Therefore, the expectation of productivity next
period E(ω it+1 ) is a function of current productivity ω it , which can be substituted by the result from the first
step. This means E(ω it+1 ) can be expressed by investment and capital at time t. Substitute the result back
into (3) rewritten at time t+1. Conditional on the information and elasticities of labor, material and other
relevant firm characteristics, consistent estimation of coefficient of capital can be generated.
The Olley-Pakes methodology makes use of plant-level investment information to correct for the
simultaneity among variable inputs and productivity. It treats the error term in equation (2) as the sum of
two parts: one is a white noise component 𝜂𝜂 it , and the other is a firm-specific, time-varying productivity
R

shock 𝜔𝜔 it . Therefore in the estimation of production functions, there exist correlation between unobserved
R

productivity shock and the input factors. This will generate inconsistent estimates using OLS. A second
problem arises as the endogeneity. Because of the sample selection, firms with low productivity exit the
market, and the remaining ones will have their 𝜔𝜔 it chosen from a selected sample.
R

13
 Based on a firm's value function for dynamic maximization:
V(𝜔𝜔 it ., k it ) = max{Vl it , sup [ Π t (𝜔𝜔 it .,k it ) - c(I it )+ 𝜎𝜎E(V t+1 (𝜔𝜔 it+1 , k it+1 )|Ω t ) ] }
R R R (8) R R

and capital accumulation process:

k it+1 = (1-𝛿𝛿)k it + I it (9)
where Vl is the firm's value if it liquidates, Π is the profit, c(I it ) is the cost correlated with investment
decision, 𝜎𝜎 is the discount factor, Ω t is all the information available at time t, and 𝛿𝛿 is the capital
R

depreciation rate. Meanwhile, 𝜔𝜔 it is assumed to follow a 1st-order Markov process. Profit maximization
R

lead to an investment function that depends on capital k and productivity 𝜔𝜔, as specified in equation (10).
By inverting (10), we have
𝜔𝜔 it =I-1(k it , I it ) = 𝜆𝜆(k it , I it )
R (10)
Substitute equation (11) back into (3), we have
y it = 𝛽𝛽 l l it + 𝛽𝛽 m m it + 𝜙𝜙 it (k it , I it ) + 𝜂𝜂 it
R R (11)
R R

where
𝜙𝜙 it = 𝛽𝛽 0 + 𝛽𝛽 k k it + 𝜆𝜆(k it , I it ).
R R R (12)
Use a 3rd-order polynomial series expansion of all the four state variables to model 𝜙𝜙, as well as the
firm and year dummies, we can obtain consistent estimates of 𝛽𝛽 l and 𝛽𝛽 m . R R

In the second step, we need to estimate 𝛽𝛽 k . According to the capital accumulation process, the capital
R

at t+1 depends on investment at time t. Therefore, at time t+1 capital k is correlated with the expectation of
productivity 𝜔𝜔, E(𝜔𝜔 it+1 )= 𝜔𝜔 it+1 - 𝜉𝜉 it+1 , where the future productivity is decomposed into an expected and
R R R

unexpected components; 𝜉𝜉 it is an unobserved and unexpected productivity shock. Moreover, expectation of

R

future productivity is a function of current productivity; I denote this function as h(𝜔𝜔 it ). Substitute the R

expression of 𝜔𝜔 it from (13) into h() then the expression of 𝜙𝜙 it from (15), I yield:
R R

E(𝜔𝜔 it+1 | 𝜔𝜔 it , k it+1 ) = h(𝜔𝜔 it )-𝛽𝛽 0 = h(𝜙𝜙 it (k it , I it )) - 𝛽𝛽 0

R R R R (13) R R

Substitute (16) into (2) at t+1 leads to

y it+1 - 𝛽𝛽 l l it+1 – 𝛽𝛽 m m it+1 – 𝛽𝛽′ Q Q it = 𝛽𝛽 0 + 𝛽𝛽 k k it+1 +E(𝜔𝜔 it+1 ) + 𝜉𝜉 it+1 + 𝜂𝜂 it+1
R R R R (14) R R R R

= 𝛽𝛽 k k it+1 + h(𝜙𝜙 it (k it , I it )) + 𝜉𝜉 it+1 + 𝜂𝜂 it+1

R R R R

Define x it = y it – 𝛽𝛽 l l it+1 – 𝛽𝛽 m m it+1 , it yields

R R

x it+1 = 𝛽𝛽 k k it+1 + h(𝜙𝜙 it (k it , I it )) + 𝜉𝜉 it+1 + 𝜂𝜂 it+1

R R (15) R R

x it+1 – E(x it+1 |k it , I it ) = 𝛽𝛽 k k it+1 – E(k it+1 | k it , I it )) + 𝜉𝜉 it+1 + 𝜂𝜂 it+1

R R R

One more assumption is needed here: the input factors are correlated with the expected productivity
shock but not the unexpected one. Therefore
E(𝜉𝜉 it+1 + 𝜂𝜂 it+1 | k it , I it ) = 0.
R R (16)
The expectations of x it+1 can be obtained from the regression of x it+1 on the same 3rd-order
polynomials of capital and investment mentioned above. Thus, a consistent coefficient on capital in
production function can be estimated.
After all the necessary coefficients are available, the log of the measured productivity is calculated as
𝑗𝑗
𝑎𝑎it = 𝑦𝑦𝑖𝑖𝑖𝑖 − 𝛽𝛽̂𝑙𝑙 𝑙𝑙𝑖𝑖𝑖𝑖 − 𝛽𝛽̂𝑘𝑘 𝑘𝑘𝑖𝑖𝑖𝑖 − 𝛽𝛽̂𝑚𝑚 𝑚𝑚𝑖𝑖𝑖𝑖 − 𝛽𝛽̂𝐹𝐹𝐹𝐹𝐹𝐹 ∑𝑗𝑗 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝐿𝐿𝐿𝐿%𝑖𝑖𝑖𝑖 . (17)
The results of the estimated input coefficients from the OP methodology are in Table A1. We also
include the OLS estimations for a comparison. As expected, OLS tends to overestimate coefficients on
variable inputs l and m, and underestimate 𝛽𝛽𝑘𝑘 .

Table A1: Coefficient Estimation of the Production Function

OLS OP
𝛽𝛽̂𝑙𝑙 0.181*** 0.161***
(0.011) (0.013)
𝛽𝛽̂𝑚𝑚 0.595*** 0.564***
(0.003) (0.005)
𝛽𝛽̂𝑘𝑘 0.137*** 0.227***
(0.003) (0.002)
̂
𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹1 0.086 ***
0.036***
(0.012) (0.012)
𝛽𝛽̂𝐹𝐹𝐹𝐹𝐹𝐹2 0.008*** 0.003***
(0.002) (0.001)
𝛽𝛽̂𝐹𝐹𝐹𝐹𝐹𝐹3 0.079 0.019

14
 (0.072) (0.067)
𝛽𝛽̂𝐹𝐹𝐹𝐹𝐹𝐹4 0.019*** 0.013*
(0.007) (0.007)

Region FE Yes Yes

Size FE Yes Yes
Year FE Yes Yes
N. obs 15,848
Notes: FLF 1 is female executive labor-force percentage; FLF 2 is female specialized worker labor-force
percentage; FLF 3 is female administrative staff labor-force percentage; FLF 4 is female auxiliary worker
labor-force percentage.

Appendix B: Figure

Figure B1: Density Distribution of Firms’ Size and Productivity

Figure B2: Density Distribution of Male LF% and Productivity among Each Size Group

15

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