Does entrepreneurship pay for women and immigrants? A 30 year assessment of the socio-economic impact of entrepreneurial activity in Germany

Abstract

Using data from the German Socio-Economic Panel from 1984 to 2012, we explore income effects of self-employment for females and migrants. Controlling for the selection into self-employment, we differentiate the overall earnings differential between the self-employed and the wage-employed into an endowment effect (they are equipped with characteristics that positively affect earnings in either occupation) and a treatment effect (the income effect solely due to the decision for self-employment). We find that women exhibit both a lower treatment effect and a lower endowment effect than men. Migrants benefit much more from entrepreneurial activities than Germans, having a significantly higher treatment effect. Among the countries of origin, Turkish migrants benefit the most from their self-employment decision, while southern Europeans exhibit the lowest income relevant skills.