COMPARATIVE ADVANTAGE IN SELF-EMPLOYMENT AND PAID WORK

I report a study, based on a representative sample of white Canadian m en, of self-employment/paid-work choice. The main findings were as fol lows: (1) Relative potential earnings was the main choice determinant. (2) Potential earnings differences between groups were primarily due to unobserved factors: market values of observed characteristics were similar between groups, and relative potential earnings, based only on observed characteristics, were not an explainer of choice. (3) Paid w orkers had higher potential earnings in both sectors, with a greater a dvantage in paid work. But the apparent comparative advantage was not significant.