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Wage Uncertainty and the Labour Supply of Self-Employed Workers

Simon C. Parker, Yacine Belghitar and Tim Barmby
The Economic Journal
Vol. 115, No. 502, Conference Papers (Mar., 2005), pp. C190-C207
Published by: Wiley on behalf of the Royal Economic Society
Stable URL: http://www.jstor.org/stable/3590377
Page Count: 18
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Wage Uncertainty and the Labour Supply of Self-Employed Workers
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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.

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