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

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  • Frank M. Fossen

Abstract

Why are female entrepreneurs so rare? Women have both to a lower entry rate into selfemployment 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.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.342272.de/dp936.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 936.

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Length: 41 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp936

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Keywords: Entrepreneurship; self-employment; risk aversion; gender differential; Nonlinear Blinder-Oaxaca Decomposition;

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Cited by:
  1. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2011. "Personality Characteristics and the Decision to Become and Stay Self-Employed," IZA Discussion Papers 5566, Institute for the Study of Labor (IZA).
  2. Lechmann, Daniel S. J., 2013. "Can working conditions explain the return-to-entrepreneurship puzzle?," Discussion Papers 86, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  3. Parker, Simon C., 2013. "Do serial entrepreneurs run successively better-performing businesses?," Journal of Business Venturing, Elsevier, vol. 28(5), pages 652-666.

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