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Only the lonely? The influence of the spouse on the transition to self-employment

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Abstract

Previous research showed that married individuals are overrepresented among the self-employed. Few studies proposed skill-spillover between the spouses within the marriage as an explanation. This paper deviates from the previous research by exploring different relationship contexts (e.g., cohabitation, being married or divorced, a widow(er) or single) and the role of partner influences under these contexts. It argues that the interaction between gender and relationship status implies variation in not only resources but also constraints, and hence sorts individuals into two different types of self-employment: entrepreneurial self-employment (i.e., incorporated business) and unincorporated self-employment. Using “Panel Study of Income Dynamics (PSID) 1965–2005” data, results of the competing risk models show that marital status contributes to both types of self-employment transitions, especially for men, but also for women. Cohabitation is a less supportive context for entrepreneurship and a partner’s self-employment experience increases only women’s likelihood of entering into entrepreneurship. These results suggest that skill-spillover between partners might be context dependent and only in one direction (from men to women).

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Notes

  1. Budig (2006) also focuses only on the married couples although, unlike others, her sample includes “not married” individuals as well.

  2. See for exceptions Parker (2008) and Arum (2004).

  3. The underlying assumptions about why an individual would share these resources with a spouse are based on Coleman’s (1990) “trust” concept and explained in detail in Bernasco (1994) and Bernasco et al. (1998).

  4. For this reason, studies on immigrant self-employment argue that immigrants prefer self-employment as an alternative means of achieving occupational success because their human capital is usually undervalued by employers in the host countries (Borjas 1986).

  5. Hundley (2000) claims that the symptoms of such behavior can be traced in the self-employment earnings gap between men and women. He argues that the earnings of self-employed women decline after marriage because of the division of labor and their specialization in non-market work.

  6. While incorporated businesses are predominantly concentrated in managerial and professional occupations that require higher skill levels and resources, most unincorporated businesses in the United States are prevalent in service-related occupations. Section three provides details about the validity of these two categories.

  7. Over the years, scholars have undertaken extensive studies of attrition bias in PSID (e.g. Fitzgerald et al. 1998). The conclusions from these studies reveal that attrition has not seriously distorted the representativeness of the PSID.

  8. If there is an adult male in the household, PSID defines him as “the head”. Our sample is not a couple-sample. Singles (male or female), who became a head of household at least once are included.

  9. Only 16 out of approximately 11,000 individuals with continuous life histories started directly as self-employed in their first year in the labor market.

  10. Self-employment transitions after retirement are beyond this paper’s focus.

  11. For a more comprehensive discussion of how weights are constructed in the PSID, please refer to Part 5 of the PSID Procedures and Codebook (publicly available at http://psidonline.isr.umich.edu/data/weights/).

  12. Low rates of female employment during the early waves allowed me to assign business ownership to husbands successfully. Assigning the ownership of the family business was not straightforward in a mere 12 cases because both partners appeared to be working. To check the sample’s robustness, I ran my estimations with and without those cases, neither the signs nor the size of the estimated coefficients changed.

  13. Individuals who respond to “be self-employed” or “own a business” are asked a second question: “Is this business incorporated?”

  14. The U.S. Bureau of Labor Statistics treats the incorporated self-employed as employees of their own businesses, and they have been classified as wage and salary earners in official statistics, Current Population Survey (CPS) and in their publications since 1967 (Hipple 2004).

  15. As a percentage of the total employment.

  16. Hipple (2010) provides a descriptive analysis about the trends of hours of work for the self-employed. He shows that 90% of women who work part-time among the unincorporated self-employed, report doing so for non-economic reasons (i.e. childcare, family and personal obligations). (His study does not report the same information for the “incorporated self-employed”). However, about 80% of part-time working men among the unincorporated self-employed in his study report non-economic reasons for their part-time arrangement.

  17. PSID started collecting data on cohabitation in 1983. However, there are ways of recovering some cohabitation information for the previous years. The algorithm for recovery files is available upon request. For robustness, I estimated all the models that include cohabitation both on the post-1983 sample and in the full sample.

  18. Note that because the risk set constitutes individuals being followed after ending their education, this variable is time-invariant.

  19. Because we run separate models for men and women the coefficient of this variable also depends on gender. This is unfortunately ignored in many studies (e.g. Arum 2004; Sorensen 2007) although transitions from unemployment/inactivity to self-employment might also be theoretically different for men and women.

  20. As a baseline hazard, I also used polynomial time. All the coefficients remained virtually the same. Yet, when time is included as a measure of duration dependency, age cannot be controlled for due to multicollinearity.

  21. I also tried a quadratic function of marriage duration to account for cumulative nature of marriage specific capital.

  22. Tables 5, 6, and 7 also report “relative risk ratios”, but throughout this section I used the term “relative odds” loosely to refer “relative risks” to improve clarity, despite the obvious differences between the two.

  23. It may be conceptually questionable whether one should control (i.e. net out) these factors at all.

  24. Additional post-estimation tests were run on the coefficients of model 5 and are available upon request.

  25. Cohabitation occurs at a different stage of the life-course than marriage, which may also drive these results.

  26. Significant at the 95% level.

  27. Calculated proportion of two relative risk ratios relative to the baseline category.

  28. The coefficients may be slightly different because sample sizes in these models are different.

  29. These findings may also imply wives joining husbands’ incorporated businesses; however I cannot test this hypothesis with the current data.

  30. Typical commands, such as xtlogit or clogit, in STATA yield non-convergence.

  31. The authors mention that this method may also work for dependent and independent variables that are categorical by applying a multinomial framework. However, I found that this procedure does not generate reliably stable parameters.

  32. The effect of cohabitation on men’s transition to unincorporated self-employment disappears when individual fixed effects are introduced.

  33. This variable takes the logarithmic form and lagged 1 year.

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Acknowledgment

I am grateful to Gosta Esping-Andersen, Fabrizio Bernardi, Juho Harkonen, Tim Futing Liao, Mario Macis, Vida Maralani, Serden Ozcan, Katherine Terrell and two anonymous referees for comments that improved earlier versions of this paper. I also thank participants of the research conference on “Female Entrepreneurship: Constraints and Opportunities” hosted by the World Bank in collaboration with the International Policy Center at the Gerald R. Ford School, University of Michigan, in Washington DC on 2–3 June, 2009.

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Correspondence to Berkay Özcan.

Appendix

Appendix

See Tables 8, 9, and 10.

Table 8 Non-repeated event, discreet-time duration models with individual fixed effects for women
Table 9 Non-repeated event, discreet-time duration models with individual fixed effects for men
Table 10 Non-repeated event and discreet-time duration models with household fixed-effects for men and women

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Özcan, B. Only the lonely? The influence of the spouse on the transition to self-employment. Small Bus Econ 37, 465–492 (2011). https://doi.org/10.1007/s11187-011-9376-x

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