The Determinants of Self-Employment in Mexico and Household Transitions between 2002 and 2005

The study of self-employment has been an intriguing factor in many developing countries. However, not many empirical studies analyze self-employment on a household level. This research focuses on Mexico in 2002 and 2005 and investigates the determinants of self-employment, transitions between self-employment and the labor market, and these transitions across asset levels all from the household perspective. The results show that high school education, asset level, previous self- employment experience and household size are important determinants of self-employment. The transition between self-employment and labor market is not homogenous across asset levels, because higher asset level increases chances of self-employment. Lastly, self-employment status decreases income, suggesting that a self-employed household will earn higher income if it were to enter the labor market.