Journal of Entrepreneurship and Business Venturing

Vol 4, Issue 1, 2024, PP. 34-53

Discovering the Connection Between Women Entrepreneurship and Economic

Complexity: Evidence from Pakistan
Saima Sajid
Department of Economics, GC Women University, Sialkot, Pakistan.
Syed Saqlain Ul Hassan
Department of Law, University of Sialkot, Sialkot, Pakistan.
Syedsaqlain.hassan@uskt.edu.pk
Maryam Arooj
Department of Economics, GC Women University, Sialkot, Pakistan.
maryamaroojnadeem@gmail.com

Corresponding: saima.sajid@gcwus.edu.pk
ARTICLE INFO ABSTRACT
Article History: Women’s participation and support in the business sector have recently emerged as
Received: 26 Sep, 2023 essential to economic diversification in developing countries such as Pakistan.
Revised: 08 Oct, 2023 Women entrepreneurs can help a country progress by expanding trade. The impact
Accepted: 21 Nov, 2023 of women’s entrepreneurship on economic complexity is still underexplored. The
Available Online: 29 Feb, 2024
current research aims to fill a lacuna in previous studies by determining the impact
DOI: of women's entrepreneurship on economic complexity in Pakistan that was
https://doi.org/10.56536/jebv.v4i1.59 less apparent in extant literature in the case of Pakistan, to the best of the
researchers' knowledge. Annual time-series data from 1991 to 2021 have
been collected for the present research. The Autoregressive Distributed Lag
Keywords: (ARDL) bound method has been utilized for analysis. The findings demonstrate
Women Entrepreneurship, Economic that women’s entrepreneurship has positively and significantly impacted economic
Complexity, Export Diversification, complexity in the long term. At a 1% significance level, a 1% increase in female
Trade Expansion, Economic Growth entrepreneurship raises economic complexity by 0.269%. The participation of
women in employment raises productivity, which in turn raises diversification and
JEL Classification: innovation, as well as the economic complexity in a country. Thus, it is essential to
L26, P45, Z22 improve gender equality by offering educational and entrepreneurial possibilities
for women. Furthermore, it provides employment-related skills and the
fundamental level of business loans.
© 2024 The authors, under a Creative Commons Attribution-Non-Commercial No Derivatives 4.0.

INTRODUCTION
Historically, entrepreneurship has been described as gender-neutral (Manzanera-Ruiz et al. 2023).
Entrepreneurship is well acknowledged for its importance in promoting economic growth and
job creation (Al-Qudah et al. 2022). In the early 1980s, it was noticed that almost all development
projects seemed to neglect women's special issues (Bel Hadj Miled, K. 2023). Moreover, as the world
community grew increasingly conscious of the necessity to minimize gender gaps, the conception of
"women's involvement in development" received attention. Researchers and policy-makers have
recognized the need to increase entrepreneurial involvement, in distributing knowledge and best
practices, especially at the universities (Pizzutilo & Venezia, 2021). The entrepreneurial mentality is
influenced by the entrepreneurial attitude, which promotes career progression (Munawar et al. 2023).
Furthermore, entrepreneurial innovation is as important as a positive mentality and education.

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Women are born with the ability to organize and multitask (Syahriyah et al., 2023; Kiani et al., 2023;
Norman and Ricciardelli, 2023). Despite handling the entire household chores, they manage to finish
their business tasks with maximal perfection and precision (Sari et al., 2023). They excel in task
planning and assignment by established criteria. Women's entrepreneurship has contributed to a
country's trade growth. Increased women's labor force participation could raise productivity, leading
to greater economic diversification, inventiveness, and poverty alleviation (WTO, 2023). Moreover,
trade contributes significantly to economic growth by improving female empowerment and gender
equality.
Just a fraction of 1% of women, in comparison to 21% of men, engage in entrepreneurial activity as
an entrepreneur (Kunwar, 2022). Women entrepreneurs have helped to boost the country's economy
and promote growth (Banihani, 2020; Feng et al. 2023). Despite the important economic function that
women entrepreneurs play in Third-World nations, their financial position is minimal (Ekong 2023).
Furthermore, this lower ranking is due to a variety of causes, such as inadequate accessibility to formal
financial systems, large financing costs as well as other infrastructure inadequacies, and gender
inequality. Pakistan ranks 143rd among the 144 countries based on female entrepreneurship (Noor &
Isa 2020). Women's participation and support in the business sector have recently become a key
component of economic differentiation in emerging countries like Pakistan (Malik, 2023).
Historical Trends of Data
Pakistan ranked 43rd in global GDP, 49th in imports, and 65th in exports in 2020, with its economy
sliding from 84th to 93rd in economic complexity over the last 20 years (OEC, 2020). Figure 1 depicts
the whole scenario of economic complexity conditions in Pakistan from 1991 to 2021.

Figure 1: Historical Trend of Data

Source: OEC, 2020

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Furthermore, the main exports of Pakistan are textiles and agriculture, etc., both of which have
minimal economic complexity. Women can also enhance the economic complexity level by working
in different areas. Women's entrepreneurship is growing in a variety of areas, including female
employment in manufacturing, services, and agriculture. In 1991, 15.69% of females were employed
in the industrial sector; over time, the ratio increased slowly, reaching 16.82% in 2019 (World Bank,
2021b).
Table 1: Trends of Women Empowerment by Sector
School enrollment, % Share of % Share
Economic % of female % of female % of female
secondary (gross), female of male
Years Complexity employmen employmen employment
Gender Parity business business
Index t in Industry t in services in agriculture
Index (GPI) owner owner
2015 -0.889 14.51 13.42 72.08 0.794 15.598 84.402
2016 -1.066 14.06 12.7 73.24 0.812 15.821 84.179
2017 -0.811 15.24 14.78 69.99 0.81291 15.731 84.268
2018 -0.758 16.47 17.11 66.43 0.85239 14.433 85.567
2019 -0.762 16.82 18.01 65.18 0.86836 13.83 86.17
Source: OEC, (2021) & World Bank, (2021)

Similarly, in 1991, 16.170% of women worked in the services industry, and this percentage improved
from 1991 to 2003, reaching 19.94% in 2003. Its percentage share fluctuated after 2003, reaching
18.010% in 2019. Furthermore, the percentage share of female agricultural workers fluctuated from
1991 to 2019, with 68.150% and 65.180% in 1991 and 2019, respectively. The percentage share of
female business owners was 16.309% in 2014, and it significantly fell over time, reaching 13.993% in
2020 (World Bank, 2021a). As previously stated, female employment in agriculture is higher than in
the industrial and service sectors, as well as in company ownership. The detailed description is
presented in Table 1 and visually illustrated in Figure 2.

Figure 2. Share of women employment by sector

Source: OEC, (2021) & World Bank, (2021)

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The female education share is nearly equal to the male education share, but when it comes to economic
empowerment, the female proportion is unacceptably low in all sectors. Furthermore, when it comes
to female entrepreneurs, the female share is far lower than the male share. The gender gap among male
and female business owners is substantial. The majority of women operate enterprises in textiles,
vocational training, and food. Women do retail and service businesses, including traditional and non-
traditional industries (Yadav and Unni, 2016). Women's abilities can be enhanced by providing
educational opportunities since, while handling all family responsibilities, women manage to complete
their business tasks with maximum perfection and precision. Women have fewer business
opportunities than men and experience discrimination in the marketplace (Shahid and Venturi, 2022).
Because women's possibilities for discovering new industries in an economy dominated by men are
finite, that is uncomfortable for a female to lead and manage a corporation with male employees
(Kunwar, 2022).
It is recognized that numerous research that evaluated entrepreneurship and economic growth as well
as development association (Chikh-Amnache & Mekhzoumi, 2023; Sajjad et al., 2020; Waseem
2019), but few studies determined the impact of entrepreneurship on economic complexity. But there
is a gap in the previous literature and to fill the gap, the primary focus is to ascertain the impact of
women's entrepreneurship on Pakistan's economic complexity. Consequently, the current study
formulates the main research questions.
Research Questions

• What is the impact of women's entrepreneurship on economic complexity in Pakistan?

• What are suitable policies that enhance the level of economic complexity by boosting women’s
entrepreneurship?
Research Objectives

• To determine the impact of women’s entrepreneurship on economic complexity in Pakistan.

• To provide appropriate policy recommendations that enhance the level of economic complexity
by boosting women's entrepreneurship.
The remaining study is separated into sections, with Section 2 reviewing the relevant literature, Section
3 presenting the theoretical background to fulfill the study's objective, Section 4 describing the data,
and econometric method, as well as discussing the findings, Section 5 concludes the overall research
and gave some suitable policy implications.

LITERATURE REVIEW
Women constitute the backbone of any country's construction. The true method for measuring a
country's development progress is to look at women's accomplishments. Throughout past times, a
significant part of a woman suffered the stability, advancement, and sustainable growth of countries
(Yanthan & Faishal, 2023). According to Theaker (2023), the quantity of female entrepreneurs is much
decreased as compared to the male entrepreneurs. Hasniati et al. (2023) indicated that personality traits
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and instrumentation ability had a substantial impact on the features of women's entrepreneurship. The
literature on the effect of entrepreneurship on economic complexity is limited.
In ASEAN countries, Chikh-Amnache & Mekhzoumi, (2023) examined the women's
entrepreneurship’ impact on economic growth by using the data span from 1991-2021. For analysis,
the researchers utilized the moments' quantile regression approach. The findings showed that women's
entrepreneurship has positively impacted economic growth. Similarly, women's empowerment has a
huge impact on increasing women's entrepreneurship, which in turn improves a country's economic
growth and development (Bobek et al., 2022; Bobek et al., 2023).
Al-Qahtani et al., (2022) indicated that female entrepreneurship performs an essential function in
fostering economic diversity along with prospering the economy, as well as creating long-term growth
which is beneficial to the community and the surroundings. Ajide (2022) examined economic
complexity’s association with entrepreneurship in African nations from 2006 to 2017. The researcher
proved that economic complexity positively as well as significantly impacted entrepreneurship. Using
the 2SPLS technique, Aparicio et al. (2022) evaluated the effect of female entrepreneurship on social
mobility in emerging economies. The researchers concluded that female entrepreneurship had a larger
effect on social mobility than male entrepreneurship. Andriamahery and Qamruzzaman (2022)
conducted a study and found that the sustainability of females' entrepreneurship along with females'
empowerment had a direct and beneficial relationship. Women entrepreneurs contribute to the
workforce and show perseverance in challenging moments via their efforts. Because of their versatility
as well as ingenuity, they are capable of perceiving as well as resolving problems in unique methods
(Deepa et al., 2022).
Nguyen et al., (2021) examined economic complexity’s association with entrepreneurial activities in
53 nations during the period from 2006 to 2016. The researchers found that there was a one-way and
U-shaped causal relation between them. Since more entrepreneurial opportunities are developed, a rise
in economic complexity ultimately enhances entrepreneurship density. Nguyen, (2021) empirically
investigated the effect of gender equality on economic complexity in 119 countries. The researcher
used the time span from 1991-2017. For analysis, this study utilized the GMM econometric approach.
According to the research, female engagement in the service and manufacturing sectors increases
economic complexity. Female participation in agriculture and female self-employment, on the other
hand, lessen economic complexity. Furthermore, an increase in female health and education benefits
economic complexity. In addition, the results concluded that gender equality had significantly affected
the economic complexity.
In India, Shrivastava (2021) examined the trials and chances of technological entrepreneurship of
women. Many women work as small company owners to support their families financially. However,
the researcher confronts financial challenges as well as insufficient family support (Maity & Sahu
2020). Female entrepreneurship increases economic independence as well as work opportunities for
women. Although the availability of opportunities and obstacles to full involvement for women varies
widely (Burga et al., 2021).
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Sajjad et al., (2020) empirically studied the influence of women entrepreneurs on economic
development using data from 69 nations from the 2015 entrepreneurship index report. The study
discovered that women's entrepreneurship increases family income and contributes to economic
development. Other studies conducted by Sajuyigbe, and Fadeyibi (2017) and Croce (2020) on the
relationship between women entrepreneurship on economic development conclude that women
entrepreneurship has positively as well as beneficially affected economic development. Waseem
(2019) empirically examined the influence of women's entrepreneurship on the growth as well as
development of the country. The researcher found that women's entrepreneurship enhances
competitiveness as well as the growth of an economy. According to Akter et al., (2019), the businesses
owned by women e.g., small and medium-sized enterprises (SMEs) are becoming progressively
significant in the alteration of institutional reforms.
Bishop et al. (2018) showed that even after controlling for industrial composition, it was discovered
that the United Kingdom Local Authority Districts with high economic complexity index scores had
a larger proportion of enterprises working in new technologies. Lock and Smith (2016) empirically
analyzed the difficulties faced by women in entrepreneurship by taking data from surveys in Kenya.
According to the findings of this study, female entrepreneurs in Kenya encounter considerably fewer
restrictions today when it comes to launching micro-enterprises, while it is promising to be a broadly
effective strategy that allows them to pull themself and their families away from poverty. Lock et al.,
(2016) explore the challenges that females confront in Kenya and conclude that women play an
important role in fostering economic growth. (Saxena, 2014) showed that rising gender equality results
in an increasingly diversified workforce, particularly in terms of more diversity in abilities and
expertise in the manufacturing process.
Theoretical Background

The relationship between female entrepreneurship and economic complexity can be obtained from
Schumpeter’s theory of economic development. This theory postulates that economic development
derived from innovation and entrepreneurship. The entrepreneurs living standard depends upon their
profitability which can be increased through new technologies by implementing inventive techniques
mainly subject of this theory. This can help them to develop new business models, called “creative
destruction” that explains the procedure through which new technologies replace old technologies.
This process is fostered by the unavoidable duplication of discoveries, which reduces profitability and
gives further incentives for people to seek out breakthroughs. This, according to Schumpeter, is the
fundamental concept of capitalism (Ogundipe 2022). The theoretical framework is presented in Figure
3.

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Figure 3. Theoretical Framework

Hypothesis: Women entrepreneurship has a positive impact on economic complexity.

DATA AND METHODOLOGY

To determine the impact of women's entrepreneurship on economic complexity in Pakistan, the
current paper utilizes an econometric methodology “Autoregressive Distributed Lag (ARDL)”. The
decision of choosing methodology depends on the stationary test. The following research used the
ARDL cointegration technique to find the long-term association among the selected variables when
all variables are stationary at the first difference: maximum likelihood-based Johansen (1988,1991),
Johansen Juselius (1990), and Engle & Granger (1987). Pesaran, Shin, & Smith (1996), and Pesaran
and Shin (1999), developed the ARDL econometric method, which has been modified by Pesaran et
al. (2001). This econometrics methodology has numerous advantages, one of which is that all variables
don't need to be stationary at a level. This technique is applicable in all scenarios, for example, when
all variables are stationary at level I (0), when all variables are stationary at first difference I(1), and
when variables are mixed I(0) & I(1) (Pesaran and Pesaran, 1997).
The following is an econometric model developed in the current study:
ECIt =β0+β1WEt+β2GFCFt+β3ERt+β4NRRt+β5FDIt+ Ɛt (1)
ECI = Economic Complexity Index
WE = Women Entrepreneurship
GFCF = Gross Fixed Capital Formation
ER = Exchange Rate
NRR = Natural Resources Rent
FDI = Financial Development Index
t = time
Ɛ = residual
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The long run equation of the ARDL model is given in equation 2.

𝑤 𝑤 𝑤
(2)
∆ 𝐸𝐶𝐼𝑡 = 𝛽𝑜 + ∑ 𝛽1𝑔 ∆WE𝑡−𝑔 + ∑ 𝛽2𝑔 ∆GFCF𝑡−𝑔 + ∑ 𝛽3𝑔 𝐸𝑅𝑡−𝑔
𝑔=1 𝑔=0 𝑔=0
𝑤 𝑤

+ ∑ 𝛽4𝑔 ∆𝑁𝑅𝑅𝑡−𝑔 + ∑ 𝛽5𝑔 ∆FDI𝑡−𝑔 + 𝛽6 𝐸𝐶𝐼𝑡−1

𝑔=0 𝑔=0
+ 𝛽7 𝑊𝐸𝑡−1 + 𝛽8 𝐺𝐹𝐶𝐹𝑡−1 + 𝛽9 𝐸𝑅𝑡−1 + 𝛽10 𝑁𝑅𝑅𝑡−1
+ 𝛽11 𝐹𝐷𝐼𝑡−1 + 𝜀𝑡

Where Δ represents the difference operator, 𝛽𝑜 indicates the constant, w represents the lag length
(optimal), The short-run elasticities represent from 𝛽1to 𝛽5 while long-run elasticities represent
from 𝛽6 𝑡𝑜 𝛽11. The long-run equation was used to create the short-run equation (error correction
term), which is presented below.
(3)
𝑤1 𝑤2 𝑤3 𝑤4 𝑤5

∆ 𝐸𝐶𝐼𝑡 = 𝛽𝑜 + ∑ 𝛽1𝑔 ∆WE𝑡−𝑔 + ∑ 𝛽2𝑔 ∆GFCF𝑡−𝑔 + ∑ 𝛽3𝑔 𝐸𝑅𝑡−𝑔 + ∑ 𝛽4𝑔 ∆𝑁𝑅𝑅𝑡−𝑔 + ∑ 𝛽5𝑔 ∆FDI𝑡−𝑔
𝑔=1 𝑔=0 𝑔=0 𝑔=0 𝑔=0
+ 𝜋1 𝐸𝐶𝑇𝑡−1 + 𝜀𝑡

To fulfill the objective of the research, this study collects data from different sources. The economic
complexity index data has been obtained by the OEC (Observatory of Economic Complexity) from
1991 to 2021. The World Bank has examined data on female entrepreneurship in female self-
employment (percentage of the total population), used as a proxy for women's entrepreneurship. The
data on the gross fixed capital formation, exchange rate, and natural resources rents were gathered
through World Development Indicators (WDI) from 1991 to 2021 while the data financial
development index was gathered through International Monetary Funds (IMF) from 1991 to 2021.
Detailed information related to the data is given in Table 2.
Table 2: Variables and Description
Variables Notation Measurement Sources Period
Dependent Variable
Economic ECI Index calculated Observatory of 1991-2021
Complexity Index from Diversity & Economic
Ubiquity Complexity (OEC),
2023
Independent
Variables
1991-2021
Women WE Female self- WDI, 2023
Entrepreneurship employment
(percentage of the
total population)
Gross Fixed GFCF Gross fixed capital WDI, 2023 1991-2021
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Capital formation (% of
Formation GDP)
Exchange Rate ER Real effective WDI, 2023 1991-2021
exchange rate index
(2010 = 100)
Natural NRR Total natural WDI, 2023 1991-2021
Resources Rent resources rents (% of
GDP)
Financial FDI Index calculated IMF, 2023 1991-2021
Development from a combination
Index of 9 indices of
financial markets and
institutions in terms
of access, depth, and
efficiency

RESULT AND DISCUSSION

The current research utilizes time-series data collected annually from 1991 to 2021. The first
stage in analysis is to present the descriptive analysis of the selected variables in the model.
Methodological framework in Figure 4 depicts a summary of the whole econometric analysis used to
achieve the goal of this study.

Figure 4: Methodological Framework

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The visual representation of time series variables used in the current study model is depicted in Figure
5.

Figure 5: Visual Representation of Data

Source: OEC and WDI

Descriptive Analysis

Economic Complexity Index (ECI) is the dependent variable; the mean value is -0.803364, the median
is -0.769176, the standard deviation is 0.206822, and the minimum and maximum values are -
1.226124 and -0.410000, respectively. Women's entrepreneurship (WE) is the independent variable,
with a mean value of 3.884023, a median of 3.975506, a standard deviation of 0.984067, and
minimum and maximum values of 2.503796 and 5.144513, respectively. Furthermore, the control
variables are Gross Fixed Capital Formation (GFCF), Exchange Rate (ER), Natural Resources Rents
(NRR), and Financial Development Index (FDI), and a thorough description of each variable is
provided in Table 3.
Table 3: Descriptive Statistics
ECI WE GFCF ER NRR FDI
Mean -0.803364 3.884023 15.42430 1.078637 1.730670 0.241131
Median -0.769176 3.975506 15.07059 1.037979 1.504202 0.217078
Maximum -0.410000 5.144513 19.11229 1.238542 2.891167 0.370925
Minimum -1.226124 2.503796 12.52063 0.964869 0.965331 0.120507
Std. Dev. 0.206822 0.984067 1.827562 0.092503 0.589477 0.074917

Unit Root Analysis

After the descriptive analysis, the unit root method was employed to assess the stationary nature of all
variables. The Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests have been utilized in
this investigation. The results of the aforementioned unit root tests, all variables (ECI, WE, GFCF,
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ER, NRR, and FDI) are I(1). As previously discussed, if the variables are I(0) or I(1), the ARDL
method can be utilized. As a result, the current study employs the ARDL technique for analysis. Table
4 presents the comprehensive findings of stationary tests.
Table 4: Unit Root Results
Without Without
With With
Constant Constant
Constant Constant
At level & Trend At first diff & Trend
Var. t-stats Prob. t-stats
Prob. t-stats Prob. t-stats Prob.
ADF
test
ECI -1.871 0.341 -0.193 0.609 -4.830 0.001*** -4.929 0.000*** I(1)
WE -0.720 0.827 1.255 0.943 -4.512 0.001*** -4.150 0.000*** I(1)
GFCF -1.504 0.518 -0.922 0.309 -4.843 0.001*** -4.781 0.000*** I(1)
ER -2.366 0.160 -1.020 0.270 -4.052 0.004*** -4.070 0.000*** I(1)
NRR -1.432 0.554 -0.373 0.542 -4.336 0.002*** -4.418 0.000*** I(1)
FDI -2.409 0.148 -0.275 0.578 -3.132 0.035** -3.159 0.003*** I(1)
PP test
ECI -2.058 0.262 -0.280 0.577 -4.935 0.000*** -5.020 0.000*** I(1)
WE -0.791 0.807 1.313 0.949 -4.500 0.001*** -4.207 0.000*** I(1)
GFCF -1.623 0.459 -0.931 0.305 -4.831 0.001*** -4.781 0.000** I(1)
ER -1.972 0.297 -1.087 0.245 -3.886 0.006*** -3.913 0.000*** I(1)
NRR -1.552 0.494 -0.373 0.542 -4.338 0.002*** -4.420 0.000*** I(1)
FDI -1.845 0.352 -0.130 0.631 -3.1611 0.033** -3.186 0.003*** I(1)
Note: *, **, and *** denotes 10%, 5% and 1% level of significance, respectively

Autoregressive Distributed Lag (ARDL) Bound Test

The ARDL bound test is based on the value of f-statistics. If its value exceeds both bound limits I (0)
and I (1), it implies that cointegration between variables exists. The value of f-statistics is 8.717393,
which is more than the bound limits of 1%, 2.5%, 5%, and 10%. As a result, the results demonstrated
that cointegration exists between WE, GFCF, ER, NRR, FDI, and ECI. Table 5 displays the detailed
results.
Table 5: ARDL Bound Test
F-Bounds Test Null Hypothesis: No relationship

Test Statistic Value Significance I(0) I(1)

F-statistic 8.717393 10% 2.26 3.35
k 5 5% 2.62 3.79
2.5% 2.96 4.18
1% 3.41 4.68

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ARDL Long-Run Results

Table 6 shows the long-run results derived from the current study's model. The findings proved that
Women’s Entrepreneurship (WE) has positively as well as significantly impacted the Economic
Complexity Index (ECI) in the long run. For instance, a 1% increase in WE cause to increase in the
ECI by 0.269640% at a 1% level of significance. Increased female entrepreneurship leads to increased
labor force productivity, which leads to more diverse products, exports, and trade, as well as economic
complexity. Gross Fixed Capital Formation (GFCF) has positively as well as significantly impacted
the Economic Complexity Index (ECI) in the long run. It means a 1% rise in GFCF leads to an increase
in the ECI by 0.143934% at a 1% significance level. Gross fixed capital formation creates investment
in equipment, machinery, buildings, etc.
Table 6: ARDL Long Run Results

Variable Coefficient Std. Error t-Statistic Prob.

WE 0.269640 0.049210 5.479349 0.0002***
GFCF 0.143934 0.028245 5.095859 0.0003***
ER -1.892802 0.554892 -3.411115 0.0058***
NRR -0.131127 0.052540 -2.495744 0.0297**
FDI -1.543788 0.529032 -2.918137 0.0140**

Note: *, **, and *** denotes 10%, 5% and 1% level of significance, respectively

This finding has a similarity to Sepehrdoust et al., 2019. This leads industries and firms to enhance
their productivity level by diversifying as well as sophisticated products which leads to a rise the
exports, trade, and economic complexity. Exchange Rate (ER) has negatively but significantly
impacted the Economic Complexity Index (ECI) in the long run. For instance, a 1% rise in the
exchange rate causes to 1.892802% decrease in the ECI at a 1% level of significance. This result is
relevant to Gabriel et al., 2017. When a nation's currency declines, imports become more expensive,
which hurts nations that import raw materials for manufacturing. Consequently, trade and economic
complexity decline as industries and firms produce and export fewer goods. Natural Resources Rent
(NRR) has negatively impacted the Economic Complexity Index (ECI) in the long run. It means a 1%
increase in the NRR causes a decrease in the ECI by 0.131127% at a 5% level of significance. This
finding is similar to the finding of Yalta and Yalta, 2021. Increases in the rent of natural resources
discourage investors from making investments, which lowers the production of diversified and
complex commodities. Consequently, the exports, trade, and economic complexity of a country
decline.
Financial Development Index (FDI) has also negatively and significantly impacted the Economic
Complexity Index (ECI) in the long run. It means a 1% rise in the FDI causes to decrease in the ECI
by 1.543788% at a 5% level of significance. This result is relevant to Aslam et al., 2022’s study.
Financial development has negatively impacted the country's economic complexity due to bad

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governance, insufficient regulation, financial sectors that make risky loans and only care about their
profits, unfavorable financial system rules, and banks and institutions that do not put money in the
right places to invest. All of these factors cause a country's exports to be less diverse and its economy
to be less complex.
Error Correction Model (ECM) Results
The Error Correction Term (ECT) describes long-term stability; its value must be both negative and
significant at 1%. The ECT value of -0.846067 proves that the short-term disequilibrium is being
corrected at this rate (0.846067%). The detailed description of the ECM is presented in Table 7.
Table 7: ECM Results
Variable Coefficient Std. Error t-Statistic Prob.
C -1.258228 0.147107 -8.553145 0.0000***
ECI -0.846067 0.268652 -3.149305 0.0093***
WE 0.238270 0.065009 3.665169 0.0037***
GFCF 0.044428 0.011109 3.999130 0.0021***
ER -1.601438 0.327026 -4.896980 0.0005***
NRR -0.110942 0.042423 -2.615132 0.0240**
FDI 1.318259 0.431831 3.052720 0.0110**

Cointegration -0.846067
R-squared 0.894544 Prob(F-statistic) 0.000008
Adjusted R-squared 0.822043 Durbin-Watson stat 2.297451
Note: *, **, and *** denotes 10%, 5% and 1% level of significance, respectively

The summary of findings also depicted in Figure 6.

Figure 6. Summary of Major Findings of ARDL Model

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Sajid et al. JEBV 4(1) 2024, 34-53

Diagnostic Test Results

The Breusch-Godfrey Serial Correlation LM test, the Breusch-Pagan-Godfrey Heteroskedasticity test,
and the Ramsey RESET test were also utilized in this work. The findings demonstrated that the
probability value for all of the aforementioned tests is larger than 5%, indicating that
heteroskedasticity, multicollinearity, and autocorrelation do not exist in the current study's model.
Table 8 contains the detailed findings of the diagnostic testing.
Table 8: Diagnostic Test Results
Breusch-Godfrey Serial Correlation LM Test:
F-statistic 0.671343 Prob. F(1,10) 0.4317
Obs*R-squared 1.761504 Prob. Chi-Square (1) 0.1844
Heteroskedasticity Test: Breusch-Pagan-Godfrey
F-statistic 0.816753 Prob. F(16,11) 0.6536
Obs*R-squared 15.20295 Prob. Chi-Square (16) 0.5098
Scaled explained SS 0.964187 Prob. Chi-Square (16) 1.0000
Ramsey RESET Test
t-statistic 0.033206 Prob. 0.9742
F-statistic 0.001103 Prob. 0.9742

When there are more observations, the histogram is better for analyzing residual normality. The
Jarque-Bera’s probability value is 0.444839, which is greater than 5% (0.05) proving to demonstrate
that the current study's model is normally distributed. Figure 7 shows the histogram's detailed
information.

Figure 7. Histogram Normality Test

The Cumulative Sum (CUSUM) and Cumulative Sum of Squares CSUMSQ techniques are utilized in
this study to check the model's stability. CUSUM and CUSUMSQ graphs illustrate that blue lines lie
between red lines and do not touch them. The findings of the aforementioned techniques demonstrated
that the study model is stable. Figures 8 & 9 show the CUSUM and CUSUMSQ.

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Figure 8. Cusum and Cusum of Squares

The fact that the centered Variance Inflation Factor (VIF) values are below to 5% of all variables
demonstrated that the model is not multicollinear. Table 9 has a thorough description of the VIF result.
Table 9: VIF Results
Coefficient Uncentered Centered
Variable Variance VIF VIF

WE 0.001034 33.10697 1.936378

GFCF 0.000295 142.3519 1.908075
ER 0.153347 359.1455 2.538113
TNNR 0.003212 21.38519 2.158576
FDINDEX 0.164262 20.87346 1.783304
C 0.338592 676.7709 NA

CONCLUSION AND POLICY IMPLEMENTATION

Women entrepreneurs can contribute to a country's progress by increasing trade. Because Pakistan
is a developing country, there is a need to increase economic complexity through exports and trade.
Women entrepreneurs can play an essential part in raising economic complexity by boosting product
diversification. Thus, the current study's objective is to fulfill the lacuna in earlier studies by
determining the impact of women's entrepreneurship on economic complexity in Pakistan. To achieve
the objective, the current research acquired time-series data annually from 1991 through 2021. The
descriptive analysis has been reported in the first step of this study's step-wise analysis. In the second
stage, the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) stationary tests have been used.
The stationary tests discussed above revealed that all variables are I (1). The Autoregressive
Distributed Lag (ARDL) bound approach is utilized in the third stage, which reveals that the f-statistics
value is larger than both bound limits I (0) and I (1). As a result, the model's study variables have a
long-run link. The long-run ARDL model findings demonstrated that Women's Entrepreneurship
(WE) has positively and significantly impacted the Economic Complexity Index (ECI). For instance,
a 1% rise in WE cause a 0.269640% rise in ECI at a 1% significance level. Furthermore, all control
variables had a substantial impact on the ECI. The ECI has been influenced favorably by GFCF, while

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negatively by ER, NRR, and FDI. Various diagnostic tests, like the Breusch-Godfrey Serial
Correlation LM, the Breusch-Pagan-Godfrey Heteroskedasticity, the Ramsey RESET tests,
the Variance Inflation Factor (VIF), the Normality test, Cumulative Sum (CUSUM), as well as
Cumulative Sum of Squares (CUSUMSQ), has been used in the last stage of this study. The
aforementioned diagnostic tests demonstrated that the study model has no heteroskedasticity,
multicollinearity, or autocorrelation.
Furthermore, the model is normally distributed and stable. Women in Pakistan have lower levels of
education than men and have fewer business options. So, a huge gap exists between male and female
business owners. Improve gender equality by providing women with educational opportunities as well
as entrepreneurship opportunities. Furthermore, provides skills relevant to employment and the basic
level of business loans. The engagement of women in the labor force increases productivity, which
leads to diversity and innovation, and it raises economic complexity. Thus, it is vital to achieve gender
equality by providing women with educational and business opportunities. Furthermore, it offers
employment-related skills and the core level of business loans. This study focuses on Pakistan's
entirety economy, but it can be broadened to include specific trade sectors like textile, agriculture, and
so on. It will make a significant contribution to future research.

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