The Covid-19 Pandemic and Female Leadership

In the aftermath of the Covid19 pandemic, it has been observed that countries led by female politicians have done better in terms of implementing social distancing measures. Examples include Angela Merkel of Germany, Jacinda Ardern of New Zealand, Mette Frederiksen of Denmark and Sanna Marin of Finland.

There is some controversy regarding the appropriate response and whether countries that locked down will experience additional waves once they emerge from lock down as opposed to a country like Sweden, which did not enforce such stringent policies. It is also the case that only a small number of countries around the world are governed by women. Extrapolating from small numbers is fraught with risks. 

But leaving those caveats aside, why were female leaders so much more pro-active in implementing social distancing policies?

Evolutionary theory may provide an answer. Evidence suggests that women tend to be more risk averse than men. An obvious consequence of this is that men tend to be hyper-competitive and over-confident. Faced with the risk of large-scale loss of lives, female leaders moved more swiftly to implement social distancing to minimize the risk. It is possibly not an exaggeration to suggest that the countries that have struggled the most in charting a consistent course (notably UK and USA) are led by competitive and over-confident men.

Evolutionary theory teaches us that a primary human drive is to pass on our genes to successive generations. Given that the amount of parental investment required of men is much less than that required of women, males can have many more off-springs than females. If a male can out-compete other males in terms of having a greater number of sexual partners, he can have more progeny. So, males have more of an incentive to compete, which in turn necessitates more risk taking, since there is always the possibility of injury or loss of life in such competitions for mates.  

In the animal kingdom, males are generally showier, more aggressive and more territorial. The level of male aggression is higher among animals that are polygamous as opposed to those who are monogamous. Males are also physically much larger than females in polygamous societies than in monogamous ones. Bull elephant seals are much larger in size than females and often engage in brutal battles for control of female harems.

Closer to home, Lise Vesterlund and Muriel Niederle show that women often tend to shy away from competing with men, even where there are no differences in their respective performance or ability. It is equally true that men tend to be over-confident and over-estimate their chances of success and therefore tend to compete “too much”.

There is now a large literature that looks at gender differences in risk aversion. Catherine Eckel and Philip Grossman point out that results from studies looking at either decisions made in abstract lottery choice experiments or in the context of financial decision making show women to be more risk averse. One example of this is that when it comes to retirement savings, a larger proportion of women prefer to invest in less risky options such as term deposits rather than stocks.

The same insight comes through if we look at actual investment behaviour of men and women.   Brad Barber and Terrance Odean study 35,000 investment accounts sorted by gender. They find that women outperform men mostly because men tend to be over-confident and trade a lot more. Women had turnover rates of 54 percent while for men this is 77 percent and the accounts with higher turnover performed worse than the average market return during this period.

In fact, there is also evidence to suggest that because women tend to be more risk-averse, they are less likely to generate asset bubbles (such as tech stock bubbles or housing bubbles) of the type that fueled the global financial crisis of 2008-09.

Helga Fehr-Duda and collaborators provide an alternative perspective on the supposedly greater female risk aversion by suggesting that men and women differ in the weights they assign to different probabilities. Women tend to underestimate probabilities of gains to a higher degree than do men, i.e. women are more pessimistic in the gain domain. The combination of these factors may lead to higher degrees of risk aversion for women.

It is also the case that such gender differences in risk taking tend to get compounded in times of stress. And existing evidence suggests that the such risk-aversion leads to the well-documented gender wage-gap, at least partly due to greater female reluctance to negotiate salaries. As Linda Babcock and Sara Laschever point out: Women don’t ask. The reluctance to negotiate may result in small differences between male and female salaries at the outset, but given that things like bonuses, outside offers and merit increases are all based on current salary, small differences in the beginning translate into large differentials a few years down the road.

However, here is a caveat: women who attend single-sex schools and those who grow up in matrilineal societies like the Khasi in India, exhibit similar risk-taking and competitive tendencies as men.

Bottomline: In times of crisis, whether it is a pandemic or a global financial crisis, when risk minimization becomes important, being led by women may be beneficial both for corporations and for countries. This also calls for greater diversity, both in the boardroom as well as in government for more reflective and deliberative policy making.