Undercover Economist

November 22, 2013 6:33 pm

Why women prefer fixed-price cars

‘Discrimination surely remains important, as anyone can see if they pay attention to how women are often treated in business environments’
©Raymond Biesinger

Angela Ahrendts is about to leave Burberry; Liv Garfield is soon to run Severn Trent; the privatised Royal Mail may soon join the FTSE 100 club with Moya Greene at the top. But one thing never seems to change: there are only a handful of female chief executives of FTSE 100 companies. Why?

There is, of course, more than one force at play. Discrimination surely remains important, as anyone can see if they pay attention to how women are often treated in business environments. For those wanting a higher standard of evidence, consider a famous study by economists Claudia Goldin and Cecilia Rouse. They demonstrated that when the top US orchestras, which were dominated by men, introduced blind auditions for new members, women became several times more likely to be offered jobs.

Another obstacle to women’s achievement is motherhood. Goldin, with Lawrence Katz and Marianne Bertrand, studied alumni from Chicago’s Booth School of Business. Men and childless women have almost indistinguishable earnings; once women start having children, the gap between them and men begins to widen. (Why this might be is itself a good question.)

Another possibility is that men and women act differently in some important way. The Why Axis, by economists Uri Gneezy and John List, explores this with a series of experiments. Gneezy and List are interested in the different sexes’ appetite for competition, and performance in competitive situations.

A simple experiment requires subjects to throw a ball into a bucket. They are offered two deals: a cash bonus for every ball that hits the target or a head-to-head match, with the winner getting three times the per-ball bonus but the loser getting nothing. Gneezy found that in the US, men tended to prefer competition and women avoided it. The same was true when the research was carried out in a patriarchal tribal society – the Masai of Tanzania.

Among the Khasi of northeast India, the situation was reversed: the women liked to compete and the men did not. Why the difference? The Khasi are a matrilineal society, and one where men have fewer economic rights than women. List and Gneezy conclude that while women generally avoid competitive pressure, this tendency must be at least partially the result of socialisation because it does not apply to the Khasi.

How should we respond to this analysis? Many essentially non-competitive jobs are filled through an intensely competitive recruitment process; perhaps that’s something we can change? List and Gneezy suggest exposing girls to more competitive situations but they also put in a word for single-sex education. They are aware of the apparent contradiction.

Here’s another tangle: Gneezy and List describe one experiment in which job adverts were posted with an hourly rate. When that rate was described as “negotiable”, both sexes haggled for more pay with enthusiasm. If negotiability had not been mentioned, the men haggled anyway but the women tended not to. Women were also more likely to apply to an advert, relative to men, if the wage was “negotiable”.

 

Gneezy and List conclude that employers should be explicit that wages are negotiable. But they also point to evidence that women prefer to buy cars that are offered at non-negotiable prices. What should we conclude? That women are attracted by negotiable wage rates but repelled by negotiable car prices? Expect no silver bullets here.

It’s clear that we haven’t cracked the glass ceiling just yet. But no matter how intractable the subject, there’s always a place for good empirical work: let’s hope that List, Gneezy, Rouse and Goldin continue to examine what that ceiling is really made of.

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The Undercover Economist Strikes Back’, by Tim Harford, is published by Little, Brown

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