Sextortion and Entrepreneurship

Sextortion, the sexual exploitation by individuals in positions of power of individuals subject to that power, has negative impacts on society at large and on individual victims. It has severe negative impacts on victims such as high chances of sexually transmitted diseases, unwanted pregnancies, psychological harm, and a range of other negative consequences. Studies have also shown that sextortion disproportionately affects women and vulnerable people. Yet, sextortion is an understudied modality of corruption. In part, this is due to the reluctance of victims to discuss or report it due to the negative stigma, a lack of strong judicial systems that can protect victims, and inadequate anti-corruption and sexual crime laws that identify sextortion and punish perpetrators. Studies on sextortion do exist, but many of them have concentrated on the Water, Sanitation and Hygiene (WASH) sector, and the literature is dominated by qualitative studies due to limited quantitative data. This paper aims to add to the existing literature on sextortion by examining the impacts of sextortion on economic decision-making and outcomes. We argue that the threat of sextortion by corrupt officials in charge of registering, licensing, and overseeing small businesses will serve as a barrier to entrepreneurship. Given that women are more often the targets of sextortion than men are, we also argue that the effect of sextortion on entrepreneurship will be stronger for women than for men. To test these hypotheses, we use data from the Global Corruption Barometer (GCB) and the Global Entrepreneurship Monitor (GEM). The data allows us to examine the entrepreneurial activities of nascent entrepreneurs in three regions in which the GCB have measured sextortion experiences – Europe, Asia, and Latin America and the Caribbean. Holding gender and other variables that can influence entrepreneurial activities – such as age, unemployment, educational attainment, GDP per capita, corruption, democracy, ease of starting a business, women’s economic participation and opportunity, trade openness, different cultural dimensions, and regions/different rounds of GCB survey – constant, we find that sextortion reduces the entrepreneurial activities of early-stage entrepreneurs. This association is only evident in the sample of female respondents. For men, sextortion does not dissuade entrepreneurial activity. We further find that while sextortion deters women engaging in opportunity entrepreneurship, there is no effect on entrepreneurship of necessity. For men, there is no effect on either type of entrepreneurship. We also show that the level of sextortion does not influence women’s perceptions of their own ability to start a business in terms of skills and competencies. We conclude that sextortion, a form of corruption that disproportionately targets women, is a barrier to female entrepreneurship. Women living in countries in which sextortion is more prevalent are deterred from availing of economic opportunities that they would otherwise attempt to realise. This has significant implications for gender equality and female economic empowerment. Female entrepreneurs motivated by necessity rather than opportunity may be at particular risk from sexual predation by public officials.