Modeling the incidence of self-employment: individual and employment type heterogeneity

Modeling the incidence of self-employment has traditionally proved problematic. Although the supply-side characteristics of the self-employed are well documented, we argue that the literature has neglected demand-side aspects. We explore the determinants of self-employment using the U.S. Survey of Consumer Finances. We present results from an econometric framework that allows us to model, separately and simultaneously, the influences of individual heterogeneity (i.e., supply-side factors) and employment type heterogeneity (i.e., demand-side factors) on the probability of self-employment. Our findings suggest that while individual characteristics are important determinants of self-employment, there are factors specific to the type of employment that influence self-employment.