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Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model

Discussion Papers 936, 41 S.

Frank M. Fossen


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Published in: Applied Economics 44 (2012) Iss. 14, 1795-1812


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.

JEL-Classification: J23;J16;D81
Keywords: Entrepreneurship, self-employment, risk aversion, gender differential, Nonlinear Blinder-Oaxaca Decomposition
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