Comparative Advantage in Self-Employment and Paid Work

Abstract

The author reports a study of self-employment/paid-work choice, based on a representative sample of white Canadian men. The main findings are as follows: relative potential earnings is the main choice determinant; potential earnings differences between groups is primarily due to unobserved factors: market values of observed characteristics are similar between groups and relative potential earnings, based only on observed characteristics, are not an explainer of choice; and paid workers have higher potential earnings in both sectors, with a greater advantage in paid work. But the apparent comparative advantage is not significant.