VC partners with more daughters more likely to hire female partners


A National Bureau of Economic Research (NBER) working paper by Paul A. Gompers and Sophie Q. Wang from Harvard University says that gender diversity may boost performance of venture capital firms. The paper is based on a study of a dataset of gender of venture capital partners’ children. It finds that partners with more daughters than sons were more likely to hire female partners. The study also finds that having more girl children had a positive effect on deal and fund performance of these partners. The authors, however, do not use these findings to argue for blanket gender quotas. They argue that such gains can come from improved diversity through genuine removal for biases.

Another NBER working paper which is also co-authored by Gompers deals with the economics of cause and effects of homophily, the tendency to connect with similar people. The paper is based on a dataset of Harvard Business School students and looks at entrepreneurial team formations among them. The study finds that demographic factors such as gender and ethnicity are more important than acquired characteristics such as education and industry in determining association among similar people. Teams formed on the basis of ethnicity were able to pull themselves up from bottom performance quartiles to median quartiles due to reduced conflicts and enhanced communication in the group. Such practices, however, are not of much help in reaching to top-performance levels.

According to an NBER working paper by Gerard Roland from UC Berkeley and David Y. Yang from Stanford University, beliefs about the value of hard work can be influenced by external circumstances beyond one’s control, but it is not imperative that such beliefs will persist across generations. During the Cultural Revolution in China (1966-76), college entrance examinations were suspended. The researchers studied the cohorts that got into college just before and after the revolution, as opposed to those who missed the chance to attend college during the revolution. The authors found that high school graduates who did not have the opportunity to attend college (“lost generation”) were more likely to believe that effort does not pay off, a belief that they held on to well into their 60s. However, the likelihood of such beliefs being passed on to the next generation was not strong, with “lost generation” parents investing more in their children’s education.

The H1B visa programme played a crucial role in spreading the US IT boom to India, according to Gaurav Khanna from the University of California and Nicolas Morales from the University of Michigan. Writing in the Ideas for India site, they note that computer programming and software development were the fastest growing occupations in the US in the 1990s, and this growth was sustained by high-skilled immigrants, in particular, Indians on computer science (CS) H1B visas. The prospect of higher wages in the US fed demand for CS degrees in India. Not all of these Indians made it to the US, though. Due to the limitations of the H1B visa, many Indian migrants also eventually returned to India. In the process, both sets of engineers acquired new skills, and this in turn helped shift IT production from the US to India, with the result that by 2005, India had surpassed the US in software exports.

Pinaki Chakraborty, professor at National Institute of Public Finance and Policy, discusses how the upcoming implementation of the goods and services tax (GST) will hurt fiscal autonomy of states. Chakraborty argues that not just states, but the central government as well cannot affect changes without the approval of the majority of the states in the GST Council. He cautions that since the autonomy of both central and state governments are now wedded to the GST Council for all matters concerning indirect taxation, it is the responsibility of the council to ensure that fiscal autonomy of all parties concerned is respected to the extent possible. The Union government should lead by example, he argues.

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