Does entrepreneurship narrow the gender earnings gap?

Abstract

Abstract Research Summary Prior research has examined whether individuals earn greater returns in entrepreneurship than in wage work but has paid little attention to gender differences in these returns. Using Swedish employee–employer data from 1990 to 2020, we compare individuals' earnings before and after they transitioned to entrepreneurship. We find that women founders earn less than men, yet this gap is smaller than in wage employment. Additionally, entrepreneurship yields disproportionately greater returns for (a) high‐ability women facing glass ceilings in salaried positions, and (b) women in male‐typed industries who encounter greater barriers to advancement in wage work. Together, these findings show that entrepreneurship can enable women to realize greater returns to their human capital, particularly when they face stronger constraints in paid employment. Managerial Summary This study examines whether entrepreneurship widens or narrows the gender earnings gap compared to wage work. Using comprehensive Swedish data that track individuals before and after founding new businesses, we show that, although women founders earn less than men in absolute terms, they experience substantially larger earnings gains than men when moving from wage work to entrepreneurship. This advantage is most pronounced for high‐ability women and for women in male‐dominated industries, who face stronger barriers to advancement in salaried work. Our findings indicate that entrepreneurship offers women a pathway to realize greater returns to their skills and experience, yielding disproportionately higher earnings compared to remaining in salaried jobs. For organizations, these results highlight how structural constraints in wage employment can push talented women toward entrepreneurship.

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