Earnings, Uncertainty, and the Self-Employment Choice

Daniel Le Maire, Bertel Schjerning

    Research output: Working paperResearch

    Abstract

    This paper investigates the relationship between self-employment choice, expected earnings, and uncertainty. Several interesting results emerge from our analysis on Danish longitudinal register data: Firstly, self-employed (taxable) personal income bunch at kink points in the tax system since self-employed can retain earnings and thereby transfer income across tax-years. Secondly, expected income level and income variance are important determinants in choice of occupation. Thirdly, men put more emphasis on expected earnings level, while women appears more risk averse, which contribute to explain why fewer women are self-employed. Finally, our results suggest that non-western immigrants are marginalized into self-employment. Occupational choice, self-employment, wage-di¤erentials, income uncertainty, risk aversion, overcon…dence, self-selection, gender di¤erences. 
    Original languageEnglish
    Number of pages26
    Publication statusPublished - 2007

    Cite this

    Le Maire, D., & Schjerning, B. (2007). Earnings, Uncertainty, and the Self-Employment Choice.
    Le Maire, Daniel ; Schjerning, Bertel. / Earnings, Uncertainty, and the Self-Employment Choice. 2007.
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    Earnings, Uncertainty, and the Self-Employment Choice. / Le Maire, Daniel; Schjerning, Bertel.

    2007.

    Research output: Working paperResearch

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    AB - This paper investigates the relationship between self-employment choice, expected earnings, and uncertainty. Several interesting results emerge from our analysis on Danish longitudinal register data: Firstly, self-employed (taxable) personal income bunch at kink points in the tax system since self-employed can retain earnings and thereby transfer income across tax-years. Secondly, expected income level and income variance are important determinants in choice of occupation. Thirdly, men put more emphasis on expected earnings level, while women appears more risk averse, which contribute to explain why fewer women are self-employed. Finally, our results suggest that non-western immigrants are marginalized into self-employment. Occupational choice, self-employment, wage-di¤erentials, income uncertainty, risk aversion, overcon…dence, self-selection, gender di¤erences. 

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