Leisure and effort at work: incorporating self-employment into urban markets

In this paper, we study self-employment in a theoretical setting derived from urban efficiency wages spatial models, where leisure and effort at work are complementary. Our model shows that unemployment tends to concentrate far from business districts, in contrast to employment and self-employment. The self-employed tend to live closer to workplaces than do the employed, as commuting has relatively negative effects, given that it affects productivity and thus earnings. We use data from the American Time Use Survey 2003-2014 to analyze the spatial distribution of self-employment, employment, and unemployment across metropolitan areas in the US, focusing on the relationship between commuting time and the probability of employment and self-employment. Our results show that employment and self-employment are negatively related to commuting, in comparison to unemployment, while self-employment is associated with shorter commutes, in contrast to those of employees, giving support to the theoretical background.