The analysis of self-employment levels over the life-cycle

Abstract

In this paper, we estimate the incidence of self-employment over a person’s life-cycle across different socio-economic groups and show to what extent self-employment rates differ across groups. The analysis utilizes data from the March supplements of the Current Population Survey. This paper shows that the probability of self-employment is increasing with age and education and is higher for men, whites, and married women compared to other groups. Females are less likely to be self-employed and the difference appears to widen in absolute terms over the life-cycle, but is largest in relative terms early in the life-cycle. We show that the gender gap is not due to marriage and the presence of children. The difference between an African–American male and the (white) benchmark is dramatic, particularly in a person’s middle age. In contrast, the difference between a high-school graduate and the (college educated) benchmark is relatively small and changes sign over the life-cycle. Young (age 34 or lower) high school graduates are more likely to be self-employed than otherwise identical college graduates, while the reverse is true for older individuals. The paper discusses explanations for these life-cycle profiles of self-employment.