Fathers of Daughters Invest Differently

My father was a conservative man, socially and politically, but on one theme he overtook the liberals in their own lane: women’s empowerment. From the time I was old enough to observe, he supported rising and powerful women. Thatcher in the 80s—at least until she started the Falklands War; Madeleine Albright in the 90s; respect for Benazir Bhutto and Corazon Aquino, as well as several business leaders.

A vivid memory I retain is his regularly handing me newspaper articles about powerful women. “Couldn’t you do this?” He was talking about Christine Bortenlänger, who started running the Munich stock exchange at 33, or the then-popular French Prime Minister Édith Cresson. Already in the new millennium, Merkel becoming chancellor was received almost like a confirmation of expectations.

What explains this progressive view, among many others he held which were rather proudly pre-Renaissance? Being raised by a war widow who had to brave adversity may be one reason. But having a daughter may be another.

Fathers of daughters are pro-woman, in almost everything

Diligent economists have shown that fathers of daughters show greater support for gender equity. US Congressmen vote more pro-woman on relevant issues if they have daughters—and even more so if they have more daughters.

Federal judges with more daughters decide more liberally on women’s issues, and this effect comes, wait for it, mostly from Republican judges. (Dad, you would have been right at home there.)

Parenting daughters is associated with a higher propensity to hire female partners in venture capital firms.

There is a 24% increase in the probability of hiring a senior female investor when a son is replaced with a daughter among existing partners in a firm.

Fathers of daughters invest better

Those senior partners I was talking about, who hire more women because they have daughters, also invest better. The research I mentioned earlier shows that improved gender diversity in the firm—induced by parenting more daughters—improves deal and fund performance. This comes mostly from the daughters of senior partners rather than junior partners (which does not surprise me, because senior partners have more influence).

Let’s think about this for a moment. There is no proof (in this evidence) that an imposed gender quota improves performance. But partners who hire more women because they have daughters find that their teams perform better. Partners whose fundamental worldview is women-friendly, and who act accordingly, perform well. In other words: partners who likely had any possible gender biases radically reduced by having a daughter make better deals.

It makes perfect sense, really. If you are capable of taking an unbiased look at investments and other decisions, you will make better ones—including in hiring.

How we got here: wealth, family planning, and the tipping point

The emergence of women’s empowerment, as well as of men who supported it, has a history. Two-century-long trends have been shown to bring this about.

First, countries became richer and individuals accumulated more capital. Second, family planning became easier. These two depend on a third trend, which is crucial in making family planning possible: spreading education.

How does this mix become a soup? Consider property rights. If they are biased towards husbands versus wives, husbands gain—but only insofar as they don’t have daughters who will lose out in the future to their husbands under the same biased rights. With family planning, there will be more families that only have daughters and no sons. So there will be some men who will suffer greatly seeing their daughters suffer. At the same time, with rising wealth, more and more men will reach a level of economic security that enables them to take risks.

At some level of average wealth and average family size, the scale tips, and men begin to want to change property laws to benefit their daughters more. The scale tips earlier, the more biased the current property rights system. So historically, it tipped earlier in common law countries than in civil law countries.

This kind of explanation would have fascinated my history-teaching dad. Sadly, we did not have the chance to discuss it. But if we had, he would have pointed out that while most laws are already changed towards equity, the power balances are not.

Excerpted, in part, from my blog Love-O-Nomics. www.dateconomics.com