Date of Award

2016

Document Type

Thesis

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Qi Ge

Keywords

self-employed, education, parent’s income, PSID, social status, industries

Abstract

This paper analyzes the variables that impact an individual’s decision to become self-employed, and primarily focuses on parent’s education and parent’s income. The research uses PSID data (from 2012), on the head of the household’s education, their parent’s income, their parent’s social status, their parent’s education, and parent’s industry. The variables are chosen based on the assumptions of the liquidity constraint theory (Evans, D. S., & Jovanovic, B. 1989), which states that individuals with more access to capital are likely to become self-employed. In addition, my research also analyses the composition of the sample to determine if PSID allows for a complete study of this topic. It also controls for region and parents industry in the probit model to better measure the impact the variables. When there is no control for region, and industry, the study finds that only parent’s income has a positive and significant impact on the probability of deciding to become self-employed. The results are slightly different when the model controls for the industries and regions. Although parent’s income continues to be positive and significant, in both regressions, father’s educational attainment (those who attended high school) only became significant when the model controls for industry and region.

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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Economics Commons

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