Wage Uncertainty and the Labour Supply of Self-Employed Workers

Simon Parker (), Yacine Belghitar () and Tim Barmby ()

Economic Journal, 2005, vol. 115, issue 502, C190-C207

Abstract: We analyse the effects of wage uncertainty on the labour supply of self-employed workers, using PSID data on self-employed American males. The standard deviation of past wages, as a measure of wage uncertainty, is the key determinant of male self-employed labour supply, with a significant positive effect. In contrast there is no effect from the (instrumented) wage or other explanatory variables. Our findings are consistent with the self-employed 'self-insuring' in response to greater uncertainty by working longer hours, and they can also help explain why self-employed Americans work longer average hours for lower average wages than their employee counterparts. Copyright 2005 Royal Economic Society.

Date: 2005
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