What Explains the Gender Earnings Gap in Self-Employment? A Decomposition Analysis with German Data

Abstract

What Explains the Gender Earnings Gap in Self-Employment?A Decomposition Analysis with German Data * Using a large data set for Germany, we show that both the raw and the unexplained gender earnings gap are higher in self-employment than in paid employment. Applying an Oaxaca-Blinder decomposition, more than a quarter of the difference in monthly self-employment earnings can be traced back to women working fewer hours than men. In contrast variables like family background, working time flexibility and career aspirations do not seem to contribute much to the gender earnings gap, suggesting that self-employed women do not earn less because they are seeking work-family balance rather than profits. Differences in human capital endowments account for another 13 percent of the gap but segregation does not contribute to the gender earnings gap in a robust way.

Spouses, Children, and Entrepreneurship

“…These estimates indicate that a rise in marriage rates decreases the entry rates into entrepreneurship of women by three times that of men and increases the average size by six times that of men. Such a pattern relates to the growing literature on the entrepreneurship gender gap (e.g., Lechmann and Schnabel (2012), Hebert (2020) and Bento et al. (2021)).…”

“…By showing the importance of family considerations for firm formation, we highlight how changes in household composition affect the firm distribution. By doing so, our article connects to the literature on the gender gap in entrepreneurship (e.g., Lechmann and Schnabel (2012), Cuberes and Teignier (2018), Hebert (2020) and Bento et al. (2021)).…”