Closing Gender Gaps in India : Does Increasing Womens' Access to Finance Help?

Gender gaps in womens' economic opportunities-labor market and entrepreneurship-have remained high inIndia. Lack of adequate collateral limits women entrepreneurs' ability to access formal finance, leaving them torely on informal sources, constraining their growth. A small-open economy DSGE model is built to investigatethe long-run macroeconomic impacts from closing gender gaps in financial access. Results suggest that anincrease in women entrepreneurs access to formal credit results in higher female entrepreneurship andemployment, which boosts India's output by 1.6 percent. However, regulations and gender-specific constraintsin the labor market limit potential gains as females' access to quality jobs in the formal sector remainsrestricted. The paper shows that the factors influencing the number of females are different from thoseinfluencing the share of females in formal economic activity. Combining gender-targeted financial inclusionpolicies with policies that lower constraints on formal sector employment could boost India's output by 6.8percent