Business grants following natural disasters and their different impact on the performance of female and male-owned microenterprises: Evidence from Sri Lanka.

ABSTRACT

OBJECTIVE: This paper investigates gender differences in the treatment effects of business grants on firm performance following natural disasters, and seeks to identify the mechanisms underlying the unequal effects. METHOD: A panel data-set from an experiment in Sri Lanka is used to measure the difference in the treatment effects of a business grant on the performance of female and male-owned firms following the 2004 Indian Ocean tsunami. The sample of 608 microenterprises includes 297 female-owned firms and 311 male-owned firms. There are 338 firms (Male = 176, Female = 162) in the treatment group that received the grant and 270 firms (Male = 135, Female = 135) in the control group that did not receive the grant. Data on firm performance, firm characteristics and owner characteristics were collected in 13 survey waves from April 2005 to December 2010. Firm performance, which is measured by firm profit, is assessed by employing linear regression with fixed effects in an intention-to-treat analysis. FINDINGS: The results suggest that the business grant has a positive impact on the performance of male-owned firms, but zero effect on that of female-owned firms. Several potential mechanisms drive the results, including gender differences in business investment, household expenditure and initial business closures. The results also show a positive treatment effect of the business grant on the psychological recovery of recipients, but there is no evidence supporting gender differences in this dimension. CONTRIBUTION This paper provides new evidence on gender differences in the treatment effects of business grants on firm performance in the context of post-disasters, and has implications for business recovery programs aimed at supporting female microentrepreneurs in the aftermath of large-scale catastrophes.