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What Explains the Gender Earnings Gap in Self-Employment? A Decomposition Analysis with German Data

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  • Lechmann, Daniel S. J.

    () (University of Erlangen-Nuremberg)

  • Schnabel, Claus

    () (University of Erlangen-Nuremberg)

Abstract

Using a large data set for Germany, we show that both the raw and the unexplained gender earnings gap are higher in self-employment than in paid employment. Applying an Oaxaca-Blinder decomposition, more than a quarter of the difference in monthly self-employment earnings can be traced back to women working fewer hours than men. In contrast variables like family background, working time flexibility and career aspirations do not seem to contribute much to the gender earnings gap, suggesting that self-employed women do not earn less because they are seeking work-family balance rather than profits. Differences in human capital endowments account for another 13 percent of the gap but segregation does not contribute to the gender earnings gap in a robust way.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6435.

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Length: 32 pages
Date of creation: Mar 2012
Date of revision:
Publication status: published as 'Why is there a gender earnings gap in self-employment? A decomposition analysis with German data' in: IZA Journal of European Labor Studies, 2012, 1 (6), [Open Access]
Handle: RePEc:iza:izadps:dp6435

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Keywords: self-employment; self-employed; earnings differential; entrepreneurship; gender pay gap; Germany;

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  1. Williams, Donald R., 2002. "Returns to education and experience in self-employment: Evidence from Germany," IRISS Working Paper Series 2002-04, IRISS at CEPS/INSTEAD.
  2. Gema Álvarez & Carlos Gradín & M. Soledad Otero, 2009. "Self-employment in Spain: Transition and earnings differential," Working Papers 0907, Universidade de Vigo, Departamento de Economía Aplicada.
  3. Kristy Eastough & Paul W. Miller, 2004. "The Gender Wage Gap in Paid- and Self-Employment in Australia," Australian Economic Papers, Wiley Blackwell, vol. 43(3), pages 257-276, 09.
  4. Leung, Danny, 2006. "The male/female earnings gap and female self-employment," The Journal of Socio-Economics, Elsevier, vol. 35(5), pages 759-779, October.
  5. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355.
  6. Gottschalk, Sandra & Niefert, Michaela, 2011. "Gender differences in business success of German start-up firms," ZEW Discussion Papers 11-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Semykina, Anastasia & Linz, Susan J., 2007. "Gender differences in personality and earnings: Evidence from Russia," Journal of Economic Psychology, Elsevier, vol. 28(3), pages 387-410, June.
  8. Verheul, I. & Thurik, A.R., 2000. "Start-Up Capital," Research Paper ERS-2000-07-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
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