We analyse the effects of wage uncertainty on the labour supply of self-employed workers, using PSID data on self-employed American males. The standard deviation of past wages, as a measure of wage uncertainty, is the key determinant of male self-employed labour supply, with a significant...

A model of credit markets under asymmetric information is proposed in which individuals differ in abilities that are valued in both entrepreneurship and paid employment. Unlike the heterogeneous ability model of de <link rid="b7">Meza and Webb (1987)</link>, over-investment is not inevitable: under-investment and...