Selection into self-employment: gender differences in Chile

Abstract: This study examines gender differences in the choice to become self-employed in Chile,focusing especially on the influence of the predicted earnings differential between selfemploymentand wage-employment. By estimating selectivity adjusted incomeequations, earnings in both sectors are predicted for each individual and the difference isused as an explanatory variable in a probit model where the dependent variable measuresself-employment status. The results show that men respond positively to the earningsdifferential whereas women respond negatively, indicating that the female choice ismostly influenced by push factors. It is also found that having small children has animportant effect on women in particular. Lastly, a comparison between employers andown-account workers shows that employers are more uniform across genders than ownaccountworkers. Due to a possibly inadequate identification strategy, these results shouldhowever be viewed with caution.