Labor market flexibility and female employment at startups: Evidence from a Regression Discontinuity in Time

Ample research has documented that women tend to be under-represented in entrepreneurship, but the majority of attention has been devoted to founders. Although few theories explain whether gender disparities continue among startup joiners, or new hires, the latter are equally critical for the success of a new venture as well as the entrepreneurial ecosystem. To address this neglect in past studies, we identify examine gender disparities among startup hires and identify the mechanisms to mitigate them. We propose that startup employers face significantly higher costs of mis-hire and thus are less likely to recruit women, who have been traditionally perceived as more difficult to evaluate and less fit for entrepreneurship, in general. Second, we expect these disparities to decline when labor markets become more flexible and the cost of termination declines.  Using evidence from the Portuguese registry data between 2009 and 2013 and the Regression in Time Discontinuity Design (RDiT), we find that women are less likely to be represented among startup hires than hires in established firms. However, the enactment of labor market flexibility reforms mitigates this disparity, motivating startups to experiment with more risky hires. Overall, our findings document the gender gap mechanisms in startup workforce and uncover a novel mechanism to help explain its emergence.