Self-Employment, Family Background, and Race

Abstract

We focus on the intergenerational transmission of the propensity to be self-employed. Our emphasis is on the role of family background, and in particular, on what we call the intergenerational pick-up rate with respect to self-employment, the probability that a person with a self-employed parent will become self-employed him or herself. We use the General Social Survey, a data source with rich information on individuals' family histories, to investigate how family background affects self-employment probabilities and to document how racial and ethnic groups differ with respect to the intergenerational pick-up rate. We confirm earlier findings that father's self-employment status is an important determinant of offspring's self-employment outcomes. New results include: 1) The impact of paternal self-employment differs by race. 2) Even independent of father's occupation, family structure plays a role. 3) Blacks have lower self-employment rates than whites in part because they have different family structures; still, within each family type, blacks have lower self-employment rates. 4) Extrapolating current patterns into the future, there is no indication that black and white self-employment rates will converge any time soon. 5) The relatively high self-employment rates of immigrants carry into the next generation, but not beyond that. 6) Male immigrants who have self-employed fathers re no more likely to be self-employed than other immigrants.