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Businesswomen in Germany and their performance by ethnicity: It pays to be self-employed

  • Amelie F. Constant

Purpose – The purpose of this paper is to study the determinants of wages and the labor market success of two kinds of entrepreneurial women in Germany: self-employed and salaried businesswomen, and investigate whether ethnicity is important in these challenging jobs. Design/methodology/approach – Using Lee's technique, the paper first estimates the probabilities of being in self-employment, a salaried businesswoman, working in other non-entrepreneurial jobs, and not working at all with a multinomial logit, and accordingly adjust the wage regressions for selection and heteroscedasticity. By employing data from the German Socio-economic Panel one can differentiate among different types of self-employment and business entrepreneurship, control for human capital and labor market structures, and estimate wages for native and immigrant women aged 20 to 65. The subject scope includes literature on entrepreneurship, self-employment, gender-edge, and immigrant earnings assimilation. Findings – Self-employment offers businesswomen a lucrative avenue with higher monetary rewards, albeit for a shorter spell. If salaried businesswomen went into self-employment, they would receive considerably higher wages and for at least 30 years. However, if self-employed businesswomen went into salaried jobs, their wages would decline. This suggests that it is the self-employment sector that offers better opportunities and monetary success, but not many businesswomen go into it. In these two entrepreneurial outlets human capital, years-since-migration and ethnicity are not significant. Research limitations/implications – Future research should overcome the cross-sectional limitation and take advantage of the panel aspect. Practical implications – Many qualified, highly educated and talented women are not part of the labor market and the entrepreneurial world. Germany should encourage these women to work, as it needs skilled workers and a stronger entrepreneurial sector. Financial disparities still exist between West and East Germany. Originality/value – The novelty comes from asserting that the entrepreneurial spirit can also exist in salaried jobs. The added value is the new empirical evidence on the importance of self-employment in Germany, where women fare well and success does not depend on ethnicity.

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Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 30 (2009)
Issue (Month): 1/2 (May)
Pages: 145-162

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Handle: RePEc:eme:ijmpps:v:30:y:2009:i:1/2:p:145-162
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  1. Amelie Constant & Klaus Zimmermann, 2006. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," Small Business Economics, Springer, vol. 26(3), pages 279-300, 04.
  2. Yannis Georgellis & Howard J. Wall, 2004. "Gender differences in self-employment," Working Papers 1999-008, Federal Reserve Bank of St. Louis.
  3. Magnus Lofstrom, 2002. "Labor market assimilation and the self-employment decision of immigrant entrepreneurs," Journal of Population Economics, Springer, vol. 15(1), pages 83-114.
  4. Constant, Amelie F. & Zimmermann, Klaus F., 2004. "Self-Employment Dynamics Across the Business Cycle: Migrants Versus Natives," IZA Discussion Papers 1386, Institute for the Study of Labor (IZA).
  5. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  6. David Blanchflower & A Oswald, 1993. "Entrepreneurship," CEP Discussion Papers dp0134, Centre for Economic Performance, LSE.
  7. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
  8. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, vol. 45(4-6), pages 680-691, May.
  9. Henning Lohmann, 2001. "Self-employed or employee, full-time or part-time? Gender differences in the determinants and conditions for self-employment in Europe and the US," MZES Working Papers 38, MZES.
  10. Clark, Kenneth & Drinkwater, Stephen, 1998. "Ethnicity and Self-Employment in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(3), pages 383-407, August.
  11. Taylor, Mark P, 2001. "Self-Employment and Windfall Gains in Britain: Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 68(272), pages 539-65, November.
  12. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  13. Amelie Constant, 2006. "Female Proclivity to the World of Business," Kyklos, Wiley Blackwell, vol. 59(4), pages 465-480, November.
  14. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
  15. Constant, Amelie F. & Shachmurove, Yochanan, 2003. "Entrepreneurial Ventures and Wage Differentials Between Germans and Immigrants," IZA Discussion Papers 879, Institute for the Study of Labor (IZA).
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