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February 2005, Vol. 128, No.2
Self-employment, entrepreneurship, and the NLSY79
Robert W. Fairlie
A relatively small, but growing, body of literature uses microdata from the 1979 National Longitudinal Survey of Youth (NLSY79) to study self-employment and entrepreneurship among young adults. The topics covered in these studies include, but are not limited to, the determinants of entrepreneurship, earnings growth among entrepreneurs, the returns to self-employment, the relationship between criminal activities and self-employment, and job satisfaction among the self-employed.
The NLSY79 is a nationally representative sample of 12,686 men and women who were between the ages of 14 and 22 when they were first interviewed in 1979.1 Survey respondents were interviewed annually from 1979 to 1994 and biannually starting in 1996. Most previous studies using this survey exclude the sample of 1,280 youths designed to represent the population enlisted in the four branches of the military as of September 30, 1978, but retain the supple-mental sample of 5,295 civilian black, Hispanic, and economically disadvantaged nonblack, non-Hispanic youth. The NLSY79 contains a wealth of information on the demographic, economic, family background, educational, and psychological characteristics of respondents. Detailed measures of the groupís labor market and life experiences from early adulthood to the mid-forties can also be created for survey respondents.
The NLSY79 is an excellent source of data for conducting research on self-employment and entrepreneurship. The wealth of information available in the survey allows one to build rich empirical models of the entrepreneurial process. Measures of previous wage and salary, self-employment, and unemployment experience can be created, and the NLSY79 contains several uncommon variables, such as those associated with detailed asset categories, family background information, data on criminal activities, Armed Forces Qualification Test (AFQT) scores, and psychological characteristics. Furthermore, a plethora of measures of the dynamics of self-employment may be extracted from the longitudinal data in the survey. For example, measures of transitions to and from self-employment, number of years of self-employment, and whether an individual ever tries self-employment can easily be created. Finally, the returns to self-employment, measured as earnings, job satisfaction, net worth, or other outcomes, can be estimated. Changes over time in labor market status can be used to identify the effects of self-employment, potentially removing biases created by unobserved heterogeneity across individuals. Given these advantages, it is somewhat surprising that more researchers have not used the NLSY79 to study self-employment. In the sections that follow, this article presents estimates of self-employment from the NLSY79, reviews findings from previous studies that used the survey, and discusses some of the merits of the data sets making up the survey.
This excerpt is from an article published in the February 2005 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 See Center for Human Resource Research, NLSY79 Usersí Guide (Columbus, OH, The Ohio State University, 1999), for a detailed description of the NLSY79.
Related BLS programs
National Longitudinal Survey
self-employment in the United States.óJan./Feb.
On their own: the self-employed and others in private businessóMay 1987.
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