Self-employment and labor market risks

Arbeitspapier

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-tocontributions ratio across skill groups. At the calibrated parameters, the self-employed in the middle of the skill distribution lose welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 1085

Classification and Topics

• Classification: Wirtschaft ; Particular Labor Markets: General ; Unemployment: Models, Duration, Incidence, and Job Search ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: self-employment ; unemployment insurance ; earnings dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Audoly, Richard
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2024

Further information

• DOI: doi:10.59576/sr.1085
• Handle: http://hdl.handle.net/10419/284045
• Last update: 20.03.2025, 11:43 AM CET