COMPARATIVE ADVANTAGE IN SELF-EMPLOYMENT AND PAID WORK

I report a study, based on a representative sample of white Canadian men, of self-employment/paid-work choice. The main findings were as follows: (1) Relative potential earnings was the main choice determinant. (2) Potential earnings differences between groups were primarily due to unobserved factors: market values of observed characteristics were similar between groups, and relative potential earnings, based only on observed characteristics, were not an explainer of choice. (3) Paid workers had higher potential earnings in both sectors, with a greater advantage in paid work. But the apparent comparative advantage was not significant.