Gender inequality in wage earnings and female self-employment selection

Female self-employment has risen strongly over the last few decades and has become an important labor market development. The few studies that have examined women’s decision to become self-employed indicate that this decision is complex. Women are more likely than men to shoulder family-related obligations, especially child rearing, and there is evidence that this affects some women’s propensity to become self-employed. Also, women have yet to achieve full economic parity with men in wage employment. This paper specifically examines how gender inequality in wage earnings may precipitate some women’s selection out of wage employment and into self-employment. We find that women’s lower wage returns to observed worker characteristics have a positive and significant effect on women’s decision to switch from wage employment to self-employment.