Many European countries are contemplating (or have already introduced) mandatory quotas for the share of women on the executive level of firms. The idea is to help women break the glass ceiling and create more equality of opportunity also in the lower ranks. Quota advocates also argue that more gender diversity at the top increases firms’ productivity and performance.
In a new IZA Discussion Paper, Daniele Paserman and Stefano Gagliarducci explored whether this is indeed the case. They looked at the outcomes of Germans firms whose share of women in leadership positions increased substantially between 1993 and 2012. Surprisingly, firms with more women at the top perform worse in terms of business volume, investment, total wage bill per worker, total employment, and turnover. On the other hand, they are more likely to implement female-friendly policies, such as providing childcare facilities or promoting and mentoring female junior staff.
But it is important to note that there is no causal effect. It is rather a matter of sorting: Women are more likely to seek leadership positions in small and less productive establishments that invest less, pay their employees lower wages, but are more female-friendly.