Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model

43 Pages Posted: 4 Nov 2009

See all articles by Frank M. Fossen

Frank M. Fossen

University of Nevada, Reno; IZA Institute of Labor Economics

Date Written: October 14, 2009

Abstract

Why are female entrepreneurs so rare? Women have both to a lower entry rate into self-employment and a higher exit rate in Germany. To explain the gender gap, a structural microeconometric model of the transition rates is estimated, which includes a standard risk aversion parameter. As inputs into the model, the expected value and variance of earnings from self-employment and dependent employment are estimated separately by gender, accounting for non-random selection into the employment states. The gender differential in the transition rates is decomposed using a novel extension of the Blinder-Oaxaca technique for nonlinear models. Women's higher estimated risk aversion is found to explain the largest part of their higher exit rate, but only a small part of their lower entry rate.

Keywords: entrepreneurship, self-employment, risk aversion, gender differential, Nonlinear Blinder-Oaxaca Decomposition

JEL Classification: J23, J16, D81

Suggested Citation

Fossen, Frank M., Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model (October 14, 2009). DIW Berlin Discussion Paper No. 936, Available at SSRN: https://ssrn.com/abstract=1499170 or http://dx.doi.org/10.2139/ssrn.1499170

Frank M. Fossen (Contact Author)

University of Nevada, Reno ( email )

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Reno, NV 89557-0030
United States

HOME PAGE: http://business.unr.edu/faculty/ffossen/

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

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