IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00683162.html
   My bibliography  Save this paper

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

Author

Listed:
  • Frank M. Fossen

    (Public Economics - DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research)

Abstract

Why are female entrepreneurs so rare? In Germany, women exhibit both a lower entry rate into and higher exit rate from self-employment. To explain this gender gap, this study estimates a structural microeconometric model of transition rates that includes a standard risk aversion parameter. Inputs into the model are the expected value and variance of earnings from self-employment and dependent employment, estimated separately by gender and accounting for nonrandom selection into self-employment. 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 explains the largest part of their higher exit rate but only a small portion of their lower entry rate.

Suggested Citation

  • Frank M. Fossen, 2011. "Gender Differences in Entrepreneurial Choice and Risk Aversion - A Decomposition Based on a Microeconometric Model," Post-Print hal-00683162, HAL.
    • Handle: RePEc:hal:journl:hal-00683162
    DOI: 10.1080/00036846.2011.554377
    Note: View the original document on HAL open archive server: https://hal.science/hal-00683162v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-00683162v1/document
    Download Restriction: no
    File URL: https://libkey.io/10.1080/00036846.2011.554377?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lex Borghans & Bart H. H. Golsteyn & James J. Heckman & Huub Meijers, 2009. "Gender Differences in Risk Aversion and Ambiguity Aversion," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 649-658, 04-05.
    2. Frank Fossen & Viktor Steiner, 2009. "Income taxes and entrepreneurial choice: empirical evidence from two German natural experiments," Empirical Economics, Springer, vol. 36(3), pages 487-513, June.
    3. F. L. Jones, 1983. "On Decomposing the Wage Gap: A Critical Comment on Blinder's Method," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 126-130.
    4. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    5. Disney, Richard & Gathergood, John, 2009. "Housing wealth, liquidity constraints and self-employment," Labour Economics, Elsevier, vol. 16(1), pages 79-88, January.
    6. Oliver Falck, 2007. "Survival chances of new businesses: do regional conditions matter?," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2039-2048.
    7. Parker, Simon C., 2008. "Entrepreneurship among married couples in the United States: A simultaneous probit approach," Labour Economics, Elsevier, vol. 15(3), pages 459-481, June.
    8. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
    9. Kanbur, S M Ravi, 1982. "Entrepreneurial Risk Taking, Inequality, and Public Policy: An Application of Inequality Decomposition Analysis to the General Equilibrium Effects of Progressive Taxation," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 1-21, February.
    10. Robert W. Fairlie & Alicia M. Robb, 2007. "Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 25(2), pages 289-323.
    11. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
    12. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    13. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
    14. Mats Hammarstedt, 2006. "The predicted earnings differential and immigrant self-employment in Sweden," Applied Economics, Taylor & Francis Journals, vol. 38(6), pages 619-630.
    15. Frank M. Fossen, 2012. "Gender differences in entrepreneurial choice and risk aversion -- a decomposition based on a microeconometric model," Applied Economics, Taylor & Francis Journals, vol. 44(14), pages 1795-1812, May.
    16. Kunze, Astrid, 2005. "The evolution of the gender wage gap," Labour Economics, Elsevier, vol. 12(1), pages 73-97, February.
    17. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    18. Joachim Wagner, 2007. "What a Difference a Y makes-Female and Male Nascent Entrepreneurs in Germany," Small Business Economics, Springer, vol. 28(1), pages 1-21, January.
    19. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 581-605, June.
    20. Caliendo, Marco & Fossen, Frank & Kritikos, Alexander, 2010. "The impact of risk attitudes on entrepreneurial survival," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 45-63, October.
    21. Yannis Georgellis & Howard Wall, 2005. "Gender differences in self-employment," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 321-342.
    22. repec:eee:labchp:v:1:y:1986:i:c:p:693-785 is not listed on IDEAS
    23. Mika Haapanen & Hannu Tervo, 2009. "Self-employment duration in urban and rural locations," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2449-2461.
    24. Holtz-Eakin Douglas & Rosen Harvey S, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-26, February.
    25. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    26. Friedhelm PFEIFFER & Winfried POHLMEIER, 1992. "Income, Uncertainty and the Probability of Self-Employment," Discussion Papers (REL - Recherches Economiques de Louvain) 1992032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    27. John Heaton & Deborah Lucas, 2000. "Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk," Journal of Finance, American Finance Association, vol. 55(3), pages 1163-1198, June.
    28. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2009. "Risk attitudes of nascent entrepreneurs–new evidence from an experimentally validated survey," Small Business Economics, Springer, vol. 32(2), pages 153-167, February.
    29. Sarah Brown & Lisa Farrel & John Sessions, 2006. "Self-Employment Matching: An Analysis of Dual Earner Couples and Working Households," Small Business Economics, Springer, vol. 26(2), pages 155-172, March.
    30. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
    31. Cullen, Julie Berry & Gordon, Roger H., 2007. "Taxes and entrepreneurial risk-taking: Theory and evidence for the U.S," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1479-1505, August.
    32. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-266, May.
    33. Taylor, Mark P, 1999. "Survival of the Fittest? An Analysis of Self-Employment Duration in Britain," Economic Journal, Royal Economic Society, vol. 109(454), pages 140-155, March.
    34. Lex Borghans & Bart H.H. Golsteyn & James J. Heckman & Huub Meijers, 2009. "Gender Differences in Risk Aversion and Ambiguity," Working Papers 200903, Geary Institute, University College Dublin.
    35. Stuart Fraser & Francis J. Greene, 2006. "The Effects of Experience on Entrepreneurial Optimism and Uncertainty," Economica, London School of Economics and Political Science, vol. 73(290), pages 169-192, May.
    36. Thomas Bauer & Mathias Sinning, 2008. "An extension of the Blinder–Oaxaca decomposition to nonlinear models," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 92(2), pages 197-206, May.
    37. Schuetze, Herb J., 2000. "Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison," Labour Economics, Elsevier, vol. 7(5), pages 507-544, September.
    38. Bruce, Donald, 2002. "Taxes and Entrepreneurial Endurance: Evidence from the Self-Employed," National Tax Journal, National Tax Association, vol. 55(N. 1), pages 5-24, March.
    39. Rees, Hedley & Shah, Anup, 1986. "An Empirical Analysis of Self-employment in the U.K," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 95-108, January.
    40. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    41. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
    42. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frank M. Fossen, 2007. "Risky Earnings, Taxation and Entrepreneurial Choice: A Microeconometric Model for Germany," SOEPpapers on Multidisciplinary Panel Data Research 29, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    3. Marco Caliendo & Frank M. Fossen & Alexander Kritikos & Miriam Wetter, 2015. "The Gender Gap in Entrepreneurship: Not just a Matter of Personality," CESifo Economic Studies, CESifo Group, vol. 61(1), pages 202-238.
    4. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, April.
    5. Peter van der Zwan & Ingrid Verheul & Roy Thurik & Isabel Grilo, 2009. "Entrepreneurial Progress: Climbing the Entrepreneurial Ladder in Europe and the US," Tinbergen Institute Discussion Papers 09-070/3, Tinbergen Institute, revised 17 Mar 2010.
    6. Cho, In Soo, 2011. "Do Gender Differences in Risk Preferences Explain Gender Differences in Labor Supply, Earnings or Occupational Choice?," Staff General Research Papers Archive 34651, Iowa State University, Department of Economics.
    7. Fairlie Robert & Woodruff Christopher M., 2010. "Mexican-American Entrepreneurship," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-44, February.
    8. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.
    9. Robert W. Fairlie & Alicia M. Robb, 2007. "Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 25(2), pages 289-323.
    10. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    11. Takanori Adachi & Takanori Hisada, 2017. "Gender differences in entrepreneurship and intrapreneurship: an empirical analysis," Small Business Economics, Springer, vol. 48(3), pages 447-486, March.
    12. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    13. Frank M. Fossen, 2012. "Risk Attitudes and Private Business Equity," Discussion Papers of DIW Berlin 1209, DIW Berlin, German Institute for Economic Research.
    14. Giuliano Guerra & Roberto Patuelli, 2016. "The Role of Job Satisfaction in Transitions into Self–Employment," Entrepreneurship Theory and Practice, , vol. 40(3), pages 543-571, May.
    15. Y Georgellis & J G Sessions & N Tsitsianis, 2005. "Self-Employment Longitudinal Dynamics: A Review of the Literature," Economic Issues Journal Articles, Economic Issues, vol. 10(2), pages 51-84, September.
    16. Frank M. Fossen & Johannes König & Carsten Schröder, 2024. "Risk preference and entrepreneurial investment at the top of the wealth distribution," Empirical Economics, Springer, vol. 66(2), pages 735-761, February.
    17. Hakan J. Holm & Sonja Opper & Victor Nee, 2013. "Entrepreneurs Under Uncertainty: An Economic Experiment in China," Management Science, INFORMS, vol. 59(7), pages 1671-1687, July.
    18. Holm, Håkan J. & Opper, Sonja & Nee, Victor, 2012. "Entrepreneurs under Uncertainty: An Economic Experiment," Working Papers 2012:4, Lund University, Department of Economics.
    19. Flèche, Sarah & Lepinteur, Anthony & Powdthavee, Nattavudh, 2021. "The importance of capital in closing the entrepreneurial gender gap: A longitudinal study of lottery wins," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 591-607.
    20. Justo, Rachida & DeTienne, Dawn R. & Sieger, Philipp, 2015. "Failure or voluntary exit? Reassessing the female underperformance hypothesis," Journal of Business Venturing, Elsevier, vol. 30(6), pages 775-792.

    More about this item

    Keywords

    Social Sciences & Humanities;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00683162. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.