Compensating Wage Differentials Among Self-Employed Workers: Evidence from Job Satisfaction Scores

42 Pages Posted: 9 Dec 2002

See all articles by Daiji Kawaguchi

Daiji Kawaguchi

University of Tokyo - Graduate School of Economics

Date Written: June 2002

Abstract

Previous studies have found that self-employed workers with long business tenure earn less than other workers with similar characteristics. This difference in earnings can be explained by the compensating wage differential theory when self-employed jobs have attractive, non-pecuniary aspects. Using the National Longitudinal Survey of Youth 79 (NLSY79), I test whether moves in and out of self-employment are associated with changes in 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-pecuniary aspects of self-employment and find that the value of self-employment in terms of job satisfaction is sufficiently high enough to support the compensating differential hypothesis as an explanation for lower earnings among self-employed workers.

Suggested Citation

Kawaguchi, Daiji, Compensating Wage Differentials Among Self-Employed Workers: Evidence from Job Satisfaction Scores (June 2002). Available at SSRN: https://ssrn.com/abstract=318026 or http://dx.doi.org/10.2139/ssrn.318026

Daiji Kawaguchi (Contact Author)

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

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