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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? 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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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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