Gender Differences: The Role of Institutions

Large gender differences in the propensity to choose challenging tasks, appear to be driven by gender differences in risk aversion and in confidence about the ability to perform a new and potentially difficult task.

Although women have made significant advances in catching up economically with men, gender differences in wages and in representation in high-profile jobs remain. The psychological literature suggests that women and men may differ in ways that affect economic decisions such as their self-perception of ability. Furthermore, perceptions of competence are intimately tied to expectations, aspirations, persistence, and the preference for challenging tasks. Women may not only be less certain about their abilities but also more risk averse, and less willing to explore and test their abilities. If women and men have different perceptions about their abilities to perform in new environments, and different tendencies to act on such perceptions, then they are likely to make different choices. If women shy away from more challenging tasks, they may be underrepresented relative to their actual abilities, which in turn may result in gender differences in economic outcomes.

In Gender Differences in Seeking Challenges: The Role of Institutions (NBER Working Paper No. 13922), authors Muriel Niederle and Alexandra Yestrumskas first ask whether for a given ability women and men differ in their preference to perform a more challenging task. They then study the impact of these differences on economic outcomes, and place special emphasis on understanding the underlying causes. They also investigate which changes in institutions can affect the choices of women and men, such that those choices will reflect the participants' performance levels rather than their gender. As such, the authors' research is part of the growing literature on the effect of non-cognitive skills and attitudes, and how gender differences in these skills and attitudes affect economic outcomes.

Niederle and her co-author find that strong preferences for the characteristics of the task (including the feedback that participants can receive about their ability level from performing various tasks) alone cannot explain the choices of women and men. Gender differences in preferences for challenging tasks are driven by differences in certainty about one's ability to perform in more challenging environments, or by differences in attitudes toward specific risks, or by uncertainty in general. For example, women may be more uncertain than men in their belief that they can perform at a high level. This could be driven by gender differences in beliefs about how much performance of the initial task corresponds to luck versus real ability, for example. Specifically, women may attribute success to luck and failure to ability, while men attribute success to ability and failure to luck.

As the authors point out, only by understanding gender differences can policymakers start to design institutions that will accommodate both genders. Simple changes in institutions can have a big effect on the self-selection of women and men. For example, the authors predict that reducing the expectation of up-front commitment may especially help high performing women to move into harder and more challenging tasks.

Ability alone cannot explain the absence of women in male dominated fields. In natural settings, issues such as discrimination, the amount of time devoted to the profession, and the desire of women to raise children may provide some explanation for the choices of women. However, the authors examine an environment in which women and men perform equally well, and in which issues of discrimination, or time spent on the job do not have any explanatory power. Even so, they find large gender differences in the propensity to choose challenging tasks, with men choosing the hard task on average 50 percent more often than women, for any given performance level. These differences appear to be driven by gender differences in risk aversion and in confidence about the ability to perform a new and potentially difficult task.

-- Les Picker