Who are the Self-employed? A New Approach

Abstract

Modelling the incidence of self-employment has traditionally proved problematic. Whilst the individual supply side characteristics of the self-employed are well documented, the literature has largely neglected (or misspecified) demand side aspects. In this paper we present results from an econometric framework that allows us to separately, and simultaneously, model the supply and demand side characteristics that determine employment outcomes. We show that whilst individual characteristics are important determinants of the type of employment contract that individuals hold, there are also important contract specific factors that influence the nature of the contract an individual is employed under. Our results suggest that workers may be "captive" to a particular type of employment because of the sector in which they work, the number of hours they prefer to work and their ethnicity. The results are based on a new estimator, the parameterised DOGEV model, which allows for ordering and correlation in the observed alternatives, and for captivity within an observed alternative.Self-employment, captivity.