Female entrepreneurship, financial frictions and capital misallocation in the US

We document and quantify the effect of a gender gap in credit access on both entrepreneurship and input misallocation in the US. Female entrepreneurs are found to be more likely to face a rejection on their loan applications and to have a higher average product of capital, a sign of gender-driven capital misallocation that decreases in female-led firms’ access to finance. These results are not driven by differences in observable individual or businesses characteristics. Calibrating a heterogeneous agents model of entrepreneurship to the US economy, we show that the observed gap in credit access explains the bulk of the gender differences in capital allocation across firms. Eliminating such credit imbalance is estimated to potentially increase output by 4%, and to reduce capital misallocation by 12%.