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Self-employment and labor market risks

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  • Richard Audoly

    (Institute for Fiscal Studies)

Abstract

I study the labor market risks associated with being self-employed. I document that the self-employed are subject to larger earnings fluctuations than employees and that they frequently transition into unemployment. Given that the self-employed are not eligible to unemployment insurance, I analyze the provision of benefits targeted at these risks using a calibrated search model with (i) precautionary savings, (ii) work opportunities in paid and self-employment, and (iii) skill heterogeneity. This exercise suggests that extending the current U.S. unemployment insurance scheme to the self-employed comes with a clear increase in the transition rate from self-employment to unemployment and an unequal benefits-to-contributions ratio across skill groups. At the calibrated parameters, the self-employed in the middle of the skill distribution lose welfare.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Richard Audoly, 2024. "Self-employment and labor market risks," IFS Working Papers W24/01, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:24/01
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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