Seminar: Moira Daly,

Title: Another look at the choice to try self-employment: a matching approach.

Abstract:

Hamilton (2000) argues that the self-employed consistently earn less than comparable employed workers and concludes that most workers who choose to try self-employment must do so because they receive substantial non-pecuniary benefits, such as "being your own boss". However, Hamilton.s analysis assumes that a worker.s entry into self-employment is irreversible. In this paper, we treat this decision as reversible and compare the lifetime income of those who try self-employment to those who do not. We find that once sectoral mobility and hours are incorporated into the agent.s decision problem, a majority of those who try self-employment fare better than those who have not. We explicitly control for selection by employing nearest neighbor matching and use PSID data to study the realized income paths of self-employed individuals and their "twins".