Transitions to Self-Employment at Older Ages: The Role of Wealth, Health, Health Insurance, and Other Factors

Lynn Karoly, RAND
Julie M. Zissimopoulos, RAND

Although the phenomenon of self-employment has received academic attention, relatively little research has been devoted to studying self-employment among those in middle and late life. Indeed, at ages 45 to 54, 8.9 percent of all workers are self-employed compared with 20.5 percent for those ages 65 and above. As a result, a disproportionate share of self-employed workers are older workers. This study uses data from the Health and Retirement Study to document the patterns of self-employment among older workers and the determinants of labor force transitions to and from self-employment at older ages. We estimate a multinomial logit model of transitions from wage and salary employment to self-employment or retirement, focusing on the effects of wealth, health, and health insurance on these transitions. Other covariates of interest include job characteristics, retirement expectations, and spouse's characteristics.