Liquidity Constraints and Occupational Choice
16 Pages Posted: 29 Jan 2009 Last revised: 27 Jun 2010
Date Written: June 26, 2010
I show that liquidity constraints are related to individuals’ occupational choice. A proxy for the prospect of becoming liquidity constrained affects negatively the probability of being self-employed as opposed to being employed in the private or the public sectors. Furthermore, individuals with higher probability of facing liquidity constraints are more likely to be employed in the public sector, which offers the highest level of job and income security, instead of being employed in the private sector.
Keywords: Occupational choice, sorting in labor markets, liquidity constraints
JEL Classification: J2, G1
Suggested Citation: Suggested Citation