Why Women Earn Less Than Men in Self-Employment

Data from a sample of 659 self-employed individuals are used to evaluate explanations for the large earnings differential between self-employed men and women. A significant portion of the differential is attributed to differences in the industrial distribution of businesses and to the differential effects of housework and family responsibilites on the earnings of males and females. Differences due to industry position are traced to the lower proportions of women in the relatively rewarding areas of construction and professional practice and their greater representation in the relatively unrewarding personal services sector. Women in self-employment appear to be burdened by housework and childrearing in ways that limit the scope of their self-employed businesses and the intensity of work effort in them. If self-employed women were to have their total hours of labor redistributed between market work and house work in the same manner as men, their self-employed earnings would be substantially increased. A portion of the differential is traceable to differences in financial capital (female-run business have smaller capital stocks) and differences in specific human capital (female self-employed have less experience in running their business).