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Title: Earnings of Self-Employed Workers and Peer Effects Among Teenagers
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Kawaguchi, Daiji |
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Earnings of Self-Employed Workers and Peer Effects Among Teenagers Ph.D. Dissertation, Michigan State University, 2002. DAI-A 63/09, p. 3293, Mar 2003 Cohort(s): NLSY79, NLSY97 Publisher: UMI - University Microfilms, Bell and Howell Information and Learning Keyword(s): Earnings; Endogeneity; Human Capital; Job Satisfaction; Labor Economics; Life Cycle Research; Modeling, Mixed Effects; Peers/Peer influence/Peer relations; Self-Employed Workers This dissertation contains three essays in applied microeconomics. Chapter 1 revisits the empirical results of Lazear and Moore [Edward Lazear and John Moore (1984) "Incentive, Productivity, and Contract" Quarterly Journal of Economics. That paper found that empirical experience-earnings profiles were flatter for self-employed workers and argued that this supported the Lazear contract theory that claim firms use life-cycle backloaded payment systems to work around principal-agent problems between firms and workers. This chapter reproduces the Lazear and Moore result on more modern data, but argues for an alternative interpretation. In particular, this chapter argues that self-employed workers face more wage variation but enjoy a higher return for human capital. A model based on these assumptions can produce flatter experience-earnings profile since self-employed workers start their career with more human capital and due to opportunity cost, they invest less in human capital on the job. The chapter develops implications of the model not found in the Lazear contract model and concludes by developing support for these implications. Chapter 2 attempts to explain the lower earnings among self-employed workers found by Hamilton [Barton Hamilton (2000) "Does entrepreneurship pay? An Empirical Analysis of the Return of Self-Employment" Journal of Political Economy. That paper found 20% lower earnings of self-employed workers with 10 years of business tenure than comparable salaried workers with 10 years of job tenure. This difference in earnings can in principal be explained by the compensating wage differential theory when self-employed jobs have attractive non-monetary aspects. Using the National Longitudinal Survey Youth 79 (NLSY79), this chapter tests whether self-employment is associated with higher global job satisfaction. By looking at changes in job satisfaction for individuals over time, I overcome the difficulty of interpreting differences in subjective job satisfaction scores across individuals that cross-sectional analysis would require. Using my estimates, I calculate the monetary value of the non-monetary aspects of self-employment and find that one dollar earned while a self-employed worker is equivalent to as much as three to four dollars earned as a salary or wage worker. Although the valuation is surprisingly high, the direction of the estimate is consistent with the compensating wage differential hypothesis. Although job satisfaction is a partial component of workers' total utility, the value of self-employment in terms of job satisfaction is sufficiently high to support the compensating differential hypothesis as an explanation for lower earnings among self-employed workers. I also evaluate several other explanations for the surprisingly high valuation of self-employment. Chapter 3 attempts to estimate peer effects on substance usage among teenagers. This chapter first summarizes the problems in the identification of peer effects. The existence of unobserved characteristics of individuals and endogenous sorting into reference groups based on unobserved characteristics causes problems in the identification of peer effects. The solutions for this problem are: (1) To control 'unobservable' through including plenty of explanatory variables using rich data set or using sibling method to difference out unobservable. (2) To use natural experimental situation in which reference group is assigned randomly. (3) To use economic theory to get a prediction that arises only from peer effect but not from contextual or correlated effect. In this chapter, the method 1 was taken. Significant peer effects were found on substance usage among teenagers. |
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Bibliography Citation
Kawaguchi, Daiji. Earnings of Self-Employed Workers and Peer Effects Among Teenagers. Ph.D. Dissertation, Michigan State University, 2002. DAI-A 63/09, p. 3293, Mar 2003. |