Determinants of entrepreneurship and self-employment for older people in Chile

In most countries self-employment rates move up along with age. This may reflect that people are expelled from wage-work as they age, facing more precarious job conditions. However, labour statistics tabulated by age might be affected by survival bias, that is, older people who remain in the labour force might differ from those who exit the labour force. To attack this problem, we estimate bivariate probit models with sample selection using Chilean data to assess the effect of aging on self-employment choices, controlling for the decision to remain working. We find that the age gradient in self-employment almost vanishes for all groups once we control for observable characteristics and for potential selection bias. These results suggest that self-employment is more frequent among older people mainly because of differential labour market exits between wage workers and self-employed, and not necessarily because of large transitions to self-employment at older ages.