Do gender differences in risk preferences explain gender differences in labor supply, earnings or occupational choice?

Date
2011-12-02
Authors
Cho, In Soo
Journal Title
Journal ISSN
Volume Title
Publisher
Source URI
Altmetrics
Authors
Research Projects
Organizational Units
Economics
Organizational Unit
Journal Issue
Series
Abstract

This paper examines the extent to which differences in risk preferences between men and women explain why women have a lower entrepreneurship rate, earn less, and work fewer hours than men. Data from the NLSY79 confirms previous findings that women are more risk averse than men. However, while less risk averse men tend to become self-employed and more risk averse men are likely to choose paid-employment, there is no significant effect of risk preferences on women's entrepreneurship decisions. Similarly, more risk aversion is associated with higher earnings for male entrepreneurs, but it has no effect on female entrepreneurial earnings. Rising rates of risk aversion lower earnings for women, consistent with theoretical effects of risk preferences on labor earnings, but the effects are of modest magnitude. Risk preferences do not explain variation in hours of work for either men or women. These findings suggest that widely reported differences in risk preferences across genders play only a trivial role in explaining differences in labor market outcomes between men and women.

Description
Keywords
risk aversion, earnings, labor supply, gender gap, self-employment, Blinder-Oaxaca decomposition
Citation
Collections