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Gender differences in entrepreneurial choice and risk aversion -- a decomposition based on a microeconometric model

  • Frank M. Fossen

Why are female entrepreneurs so rare? In Germany, women exhibit both a lower entry rate into and higher exit rate from self-employment. To explain this gender gap, this study estimates a structural microeconometric model of transition rates that includes a standard risk aversion parameter. Inputs into the model are the expected value and variance of earnings from self-employment and dependent employment, estimated separately by gender and accounting for nonrandom selection into self-employment. 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 explains the largest part of their higher exit rate but only a small portion of their lower entry rate.

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File URL: http://hdl.handle.net/10.1080/00036846.2011.554377
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 44 (2012)
Issue (Month): 14 (May)
Pages: 1795-1812

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Handle: RePEc:taf:applec:44:y:2012:i:14:p:1795-1812
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  8. Frank M. Fossen, 2009. "Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model," Discussion Papers of DIW Berlin 936, DIW Berlin, German Institute for Economic Research.
  9. Kanbur, S M Ravi, 1982. "Entrepreneurial Risk Taking, Inequality, and Public Policy: An Application of Inequality Decomposition Analysis to the General Equilibrium Effects of Progressive Taxation," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 1-21, February.
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