Declining self-employment in Japan

The self-employment rate has decreased in Japan. This paper examines reasons why working householders aged below 55 avoid self-employment, focusing on age, location, and gender effects. Increasing age and living in local areas encourage householders to be Self-employed. Between 1989 and 1994, however, both the age and local effects weakened, while the positions of self-employed females were not improved. We estimate earnings functions for self-employed workers and employees, controlling sample selection bias. The decline in real income of self-employed workers relative to employees particularly in metropolitan areas was more likely to prevent over-35 householders from being self-employed. (C) 2002 Elsevier Science (USA).