When innovation reinforces gender and salary inequalities

The ecosystem of entrepreneurial innovation accentuates the differences in income between men and women, writes UNSW Business School’s Pauline Grosjean

There is a neglected dimension of all the debates on inflation and social and gender inequalities: on average, the goods and products consumed mainly by men and the wealthy classes are relatively less expensive than those consumed by women and the upper classes than the socially disadvantaged. This seems a priori incongruous, but the argument, brilliantly described in an article by Elias Einiö, Josh Feng and Xavier Jaravel (Social Push and the Direction of Innovation, London School of Economics, Mimeo, October 2023), is nevertheless simple.

In economics, competition lowers prices. Competition in the goods market comes from innovations and business creation, itself facilitated by finance and venture capital. However, the majority of inventors, innovators, entrepreneurs, start-ups and other venture capitalists are men, from a privileged social background. And what do rich men do? They invent products for other rich men, thus lowering the prices of these products, and widening consumption inequalities between women and those from less advantaged backgrounds.

To prove this, Einiö, Feng and Jaravel assembled extremely detailed data from the United States and Finland on consumption baskets by gender and income level, which they combined with data on gender and social origin of innovators and entrepreneurs. They then show that female inventors and entrepreneurs invent and market products mainly consumed by women, in a proportion that has remained stable for decades.

Pauline Grosjean.jpeg
UNSW Business School's Pauline Grosjean says the majority of inventors, innovators, entrepreneurs, start-ups and other venture capitalists are men, often from a privileged social background. Photo: supplied

Fierce competition for male goods

However, women represent only 12 per cent of inventors in the United States (and even less in Finland at 7.8 per cent), around 30 per cent of entrepreneurs, and between 4 and 6 per cent of venture capitalists. The logical consequence is that competition is much fiercer for mens’ goods, the prices of which are driven down.

Thus, the authors estimate that the average gap in the cost of living between women and men is 18.7 per cent, approximately as much as the average gap in salaries between women and men! Thanks to the combined effect of their higher wages and lower consumer prices, men consume 43 per cent more than women. They also have access to more goods and services that meet their particular needs, which the authors show with the example of applications for mobile devices.

According to the authors' calculations, these inequalities in female-male consumption would be halved, and the average gap in the cost of living between women and men eliminated, if there were as many female innovators as male innovators. They also show that social inequalities in the cost of living between the first and last income deciles are comparable to those between men and women.

But why do inventors innovate more for their gender and their social environment than for “all of humanity” as they often claim? Not out of economic interest, but simply out of a lack of imagination. In fact, the authors show that future inventors who attend a school with more girls will later invent more for women; and that those who share school benches with less advantaged children will later invent more in the sectors of necessity goods, that is to say, goods which represent a greater share of the consumption of poorer households.

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Economic interest and profitability do not play a role in driving this innovation bias, and these differences in innovation are not associated with differences in income between the inventors. The question now remains of accelerating the access of women and individuals from disadvantaged social origins to scientific careers and innovation.

Pauline Grosjean is a Professor of Economics at UNSW Sydney, a Fellow of the Academy of the Social Sciences in Australia, and a Fellow of the Centre for Economic Policy Research (CEPR). Her research studies the historical and dynamic context of economic development. In particular, she focuses on how culture and institutions interact and shape long-term economic development and individual behaviour. This article was originally published in Le Monde, and was translated from French to English for republishing.


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