Using data from the General Household Survey 1973-95, it is shown that
there were substantial differences between the earnings of whites and
nonwhites in the self-employment sector of the British labour market
over the period. Fitting a model of earnings determination which takes
account of sample selectivity allows these differences to be decompos
ed into characteristics and coefficients effects. It turns out that bo
th are important. Further decomposition reveals a crucial role for dif
ferences in the amount of schooling received by whites and nonwhites a
nd in the returns to age, gender, marital status and qualifications.