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Title: Drug Dealing and Legitimate Self-Employment
Resulting in 1 citation.
1. Fairlie, Robert W.
Drug Dealing and Legitimate Self-Employment
JCPR Working Paper 88, Joint Center for Poverty Research, Northwestern University/University of Chicago, April 1999.
Also: http://www.jcpr.org/wpfiles/fairlie_selfemployment.pdf
Cohort(s): NLSY79
Publisher: Joint Center for Poverty Research
Keyword(s): Crime; Drug Use; Illegal Activities; Self-Employed Workers; Wages

Permission to reprint the abstract has not been received from the publisher.

Theoretical models of self-employment posit that attitudes toward risk, entrepreneurial ability, and preferences for autonomy are central to the individual's decision between self-employment and wage/salary work. None of the studies in the rapidly growing empirical literature on self-employment, however, have been able to test whether these factors are important determinants of self-employment. I explore this hypothesis by examining the relationship between drug dealing and legitimate self-employment. A review of ethnographic studies in the criminology literature indicates that drug dealing represents a good proxy for low risk aversion, entrepreneurial ability, and a preference for autonomy. The 1980 wave of the National Longitudinal Survey of Youth (NLSY) contained a special section on participation in illegal activities, including questions on selling marijuana and other "hard" drugs. I use the answers to these questions and data from subsequent years of the NLSY to examine the relationship between drug dealing as a youth and legitimate self-employment in later years. Using various definitions of drug dealing and specifications of the econometric model, I find that drug dealers are 11 to 21 percent more likely to choose self-employment than non drug dealers, all else equal. I also find that drug dealers who sold more frequently, used drugs less frequently, or reported receiving income from drug dealing are more likely to choose self-employment than other drug dealers. I interpret these results as providing evidence that low risk aversion, entrepreneurial ability, and a preference for autonomy are important determinants of self-employment. I also provide evidence against a few alternative explanations of the positive relationship between drug dealing and self-employment.
Bibliography Citation
Fairlie, Robert W. "Drug Dealing and Legitimate Self-Employment." JCPR Working Paper 88, Joint Center for Poverty Research, Northwestern University/University of Chicago, April 1999.