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Evidence from natural experiments in Norway and Italy provide insight into the short-term effect of gender quotas.
Women continue to gain ground in education and the labor market, yet they are still highly underrepresented in executive business positions. As a solution, some governments have passed laws mandating more diversity at the board level, with the hopes that positive effects on gender diversity will “trickle-down” to other women in corporations, other high-achieving women in business, and other women in the general labor force. This review of current literature in the domain of gender quotas and labor-force outcomes examines two recent papers investigating the effects of corporate board gender quotas in Norway and Italy. Although gender quotas at the board level can improve outcomes for women to whom the quota directly applies, there is no evidence in either natural experiment of improvements to other women in business following the quota.
Evidence from Norway
In Norway, a law mandating 40 percent representation of each gender on the boards of public limited liability companies (ASA firms) was introduced in 2003 and made compulsory in 2008. The change expanded a law previously introduced in Norway in 1981 that applied to government-appointed boards, councils and committees. Although Norway is considered progressive for gender equality only 5 percent of board members of ASA firms were women before the quota.
Bertrand et al. examine the effects of the reform on characteristics of female board members, on women employed by ASA companies subject to the reform, on a larger set of highly qualified women with similar characteristics to female board members, and on young individuals considering a business career.
Although the results of this research suggest that the average quality of female board members improved after the reform, the findings do not show evidence of a trickle-down effect. There is no evidence that the quota led to improved outcomes for women employed by ASA firms or for other highly qualified women outside of the firm who are not board members.
The authors use pre-reform variation in female board representation across ASA firms in 2000 to capture the exogenous variation in changing female representation at the time the law was passed. Firms with a lower share of women on their board before the reform will have to change more in order to be compliant. There is no evidence of an improvement in outcomes for female employees – outcomes which include share of employees who are women, women with MBAs, women with kids, or women working part time – because of the mandated increase in the percentage of female board members. The results do not show any consistent evidence of increased representation of female employees among top earners following the increase in percentage of female board members.
In addition to showing no improvement for women in ASA firms overall, the most robust results suggest a possible negative effect of the mandated board member quota on women’s representation among top earners within an organization. Increasing the share of women on the board may reduce the share of female employees in the top quartile of the earnings distribution of the firm. The authors cannot identify the specific mechanisms of these counterintuitive impacts. One possible explanation is that as both a numerical minority and a member of a high-status group (such as a board), female tokens are less likely to respond positively to other women as group members. Female tokens may be concerned that a highly-qualified woman will be viewed as more valuable than they are, or that a moderately-qualified woman will reinforce negative stereotypes about women and damage others’ perceptions of them. In addition, women in high-status groups may also fear appearing biased towards another woman and thus avoid advocating for the advancement of other women.
To test the effects of a mandated quota on other highly qualified women outside of the ASA firms subject to the quota, the authors use a cohort approach. Because of the difficulties of defining highly qualified women, the authors identify two sets, both limited to men and women between the ages of 35 and 55, consisting of:
- Individuals with the highest predicted probability (above 99.5th percentile) of board membership. This predicted probability is calculated using a linear probability model of characteristics of men in the pre-reform period that predict their probability of being on a board of director.
- Individuals with graduate or undergraduate business degrees with earnings of the 98th percentile of earnings distribution.
The authors perform a regression for one of two outcomes: earnings or belonging to the top five earners of ones firm. The results show no evidence of declining gender gaps among the set of highly qualified women.
The authors conclude their study by looking at gender gaps among younger individuals contemplating a business career, pursuing a business-related degree or who have recently started a business career using time-series evidence, qualitative surveys, and cohort analyses. The gender gap in the likelihood of completing a business degree or social studies, law or business degrees does not decline among graduates. Among undergraduates, a decline in the gender gap appears to coincide with the post-reform period but is mostly a recovery from the widening of the gap during the reform period. The gender gap in early career earnings increases during the pre-reform period and the period of the reform, but post-reform the gender gap is comparable to the baseline cohort, indicating that women seem to be doing better in the post-reform cohort compared to their two closest cohorts, although not better than the baseline. To establish if the diminishing gender gap is unique to the field of business, the results for business graduates are compared to results for recent natural science graduates. The gender gap within the field of natural science is shrinking at a faster rate than the gender gap in the field of business. This suggests that the improvements to women’s’ outcomes are not specific to the field of business and may be a result of broader changes in society rather than mandated board representation. To analyze how the quota affects perceptions and outcome expectations, the authors perform an online survey of all current students at Norwegian School of Economics. Among female respondents, 70 percent believe that the quota will improve their labor market outcomes although they do not expect to modify family plans as a result. This is notable because childbirth is a major obstacle to recent female graduates in business staying on the fast track.
An Italian experiment
Did an Italian law mandating more diversity at the board level have an impact on diversity among top executives and on the overall gender workforce composition? Italy introduced the Golfo-Mosca law in 2011 that went into effect in August 2012. The law was temporary, gradually introduced, and applied to boards of directors and auditors of companies listed at the Italian Stock Exchange. Because of variation in board renewals across firms, the quota began to apply at different times in different firms. The law mandated a minimum of 1/5 of board seats for each gender with the first board appointment following August 2012, a minimum of 1/3 of board seats for each gender starting with the second appointment following August 2012 and expired with the third term of board appointments. The 2019 paper Female Leadership and Gender Gap within Firms: Evidence from an Italian Board Reform  analyzes the effect of the mandated quota on female representation at the top executive level and among top earners, the appointment of a female CEO, and overall gender workforce composition.
The results of this research find no evidence that the quota increased female representation at the top executive level or among top earners, some indication that listed companies promoted a female manager as CEO but with no increase in the representation of women among top earners and only in companies that had already fulfilled the female board quota in 2012. Additionally, the results show no evidence of changes in overall gender workforce composition due to the reform.
The authors use three identification strategies in order to show the effects of the mandated quota on the gender gap within companies:
- Exploit variation in the timing of board elections at which the gender quota becomes binding
- Compare post-election outcomes in listed firms with a matched comparison group of limited non-listed firms not subject to the quota using difference-in-difference design
- Use heterogeneity in the incentive for board adjustments at the company level by exploiting variation in the share of female board members in the pre-reform period
The comparison group of non-listed firms is identified from a set of non-listed firms that employ at least one manager and have continuous data for the study period. The authors apply a matching procedure to create a control group.
The authors conduct a comparison of trends in female representation in leadership over time in the sets of listed and non-listed firms. A major change in the gap between listed and non-listed firms beginning in 2012 could indicate an effect of the quota. There is no evidence, however, of a major change in the gap, which indicates that the quota did not have a difference on female representation. A linear regression confirms their findings.
The first identification strategy exploits the variation in time of board elections. The authors estimate a model illustrating the immediate or very short-term effects of the quota by comparing outcomes in firms that appoint a new board early with firms that are scheduled to appoint a new board later.
To exploit the variation in the share of female board members among firms that existed before the reform, the authors identify three groups of companies:
- “high incentive” – less than 10% of board members are female in 2012 (47% of listed companies)
- “medium incentive” – more than 10% but less than 20% of board members are female in 2012 (31% of listed companies)
- “low incentive” – firms who already fulfilled the first step of quota regulation with 20% or more female board members in 2012 (22% of listed companies)
There is evidence that gender diversity in 2012 is correlated with the diversity of the board of directors. Low incentive firms have higher shares of female employees and higher shares of women at the top of earnings distribution. To test differences across the groups, the authors estimate the previous two models, interacting dummy variables for group membership with the reform indicator variable.
Overall, the Golfo-Mosca law does not have an impact on female representation at the top executive level. The share of companies employing at least one female manager does not change and the share of female managers in the overall workforce does not increase significantly. There is a positive increase in listed companies promoting a female manager to CEO, however, this is not accompanied by a substantial change in representation of women among top earners. There are no longer-term effects in comparison with the matched non-listed firms on the overall gender composition of the workforce.
Do the results indicate that high and medium incentive firms that must make a larger adjustment to achieve the quota become more similar to low incentive firms that start out with a higher share of female directors? Counterintuitively, additional female CEOs are appointed only by the low incentive firms. There are less reasons for a low incentive firm change its gender composition among executives with the same timeframe as board elections. Therefore, these results indicate the possibility that firms who started diversifying gender earlier moved to differential trends with gender diversity and violate the common trend assumption of the heterogeneity analysis. It is impossible to rigorously test this violation because of the small sample size, so the authors warn to interpret the findings of the appointment of female CEOs with caution.
The authors propose several explanations for the reform’s lack of effect. The number of high-profile positions created by the reform is relatively limited. If the law creates change by changing perceptions and social norms, the economic outcomes will respond with a delay and will not be evident in the short run. In addition, research indicates that new female board members are not in powerful positions that allow them to influence changes at the firm level.
A brighter future for women in business?
Despite evidence from both studies not indicating any trickle-down effect of board gender quotas, there are still reasons to believe that the situation for women in the corporate world could improve in the future. It is important to keep in mind that these studies are recent, and thus cannot make any definitive conclusions on the long-term effects of such policies. Notably, when dealing with the subject of gender, socially-inscribed stereotypes, norms, and beliefs may not be so quick to adapt in the short term. Repeating similar studies in the future may reveal evolving norms and beliefs, and hopefully improved labor-market outcomes for all women in business.
 Bertrand, M., Black, S. E., Jensen, S., & Lleras-Muney, A. (2019). Breaking the glass ceiling? the effect of board quotas on female labour market outcomes in Norway. The Review of Economic Studies, 86(1), 191-239
 Duguid, M. (2011). Female tokens in high-prestige work groups: Catalysts or inhibitors of group diversification?. Organizational Behavior and Human Decision Processes, 116(1), 104-115.
 Duguid, M. M., Loyd, D. L., & Tolbert, P. S. (2012). The impact of categorical status, numeric representation, and work group prestige on preference for demographically similar others: A value threat approach. Organization Science, 23(2), 386-401.
Maida, A., & Weber, A. (2019). Female Leadership and Gender Gap within Firms: Evidence from an Italian Board Reform.