Gender wage inequality and women’s self-employment

Theoretical literature on entrepreneurship hints that labor market inequality may constitute a relevant push factor for self-employment. Drawing on empirical confirmation, this insight is used in many policy recommendations. We propose a new approach to test and quantify the link between labor market inequality and self-employment of women. We provide a novel and rich data set labor market inequality for women, utilizing estimates of gender wage gaps specific for age and education group, comparable for 36 countries over ten years. We exploit rich and diverse international data on patterns of self-employment from the Global Entrepreneurship Monitor. Our results show that greater gender wage inequality is associated with higher prevalence of self-employment for both men and women. Relative to men, women are actually discouraged from self-employment, which is consistent with the notion that discriminative labor markets are typically signs of discriminative societies. We show that actually necessity self-employment is more rare form of self-employment in unequal societies, which is consistent with explanations stressing access to resources, networks and markets as relevant dimensions of gender inequality.