The male/female earnings gap and female self-employment

Abstract

This paper examines the gender differences in the choice to become self-employed. Of particular interest is the relationship between the male/female earnings gap in wage and self-employment, and the male/female differences in the average predicted probability of self-employment. It has been argued that earnings inequality in wage-employment lead women to choose self-employment. However, it may be the case that inequality in the form of consumer discrimination causes an earnings gap between males and females in self-employment. If inequality is higher in self-employment than in wage-employment, then there would be females in wage-employment who would be in self-employment in the absence of inequality in both sectors.