Self-Employment Matching: An Analysis of Dual Earner Couples and Working Households Sarah Brown Lisa Farrel John G. Sessions ABSTRACT. This paper explores the significance of intra-couple and intra-household influences on self- employment. It may be the case that employment type matching is prevalent whereby individuals within a couple or household are characterised by similar types of employ- ment. Alternatively, an individual may pool income risk with his/her partner by holding a diversified portfolio of employment types within the household thereby introduc- ing an element of intra-household risk pooling. Such an arrangement may be particularly appropriate if one member of the couple is self-employed. We utilise ordered probit and random effects ordered probit analysis to explore the prevalence of employment matching and/or risk pooling within couples or households. Our empirical analysis which is based on cross-section data drawn from the British Family Expenditure Surveys 1996 to 2000 provides evidence of employment type matching both within dual earner couples and, to a lesser extent, in the wider context of working household members. KEY WORDS: Dual Earner Couples; Performance Related Pay; Random Effects Ordered Probit Model; Self-employment. JEL CLASSIFICATION: J20, J23, J24, J12 1. Introduction Over the last decade, the self-employed have emerged as an important group of workers in many developed countries. The increasing proportion of self-employed individuals in the labour force has led to interest amongst both economists and policy makers in the characteris- tics of the self-employed. Recent research has, for example, focused on the attributes of the self-employed concentrating on characteristics such as gender, ethnicity and father’s occupation – see Le (1999) for a comprehensive survey of this area. Hence, family background and individual char- acteristics appear to be important determinants of an individual’s observed type of employment. One might also predict that intra-household influ- ences such as the type of employment of one’s spouse may also affect an individual’s observed type of employment. Individual characteristics such as marital status, for example, have been incorporated into some empirical studies of self-employment. Blanchflower and Oswald (1990) and Bernhardt (1994), for instance, find that having a working spouse enhances the probability of self-employment. In a similar vein, recent literature has focused on the similarity of employment status within Final version accepted on June 11, 2004 Sarah Brown Department of Economics University of Sheffield 9 Mappin Street Sheffield S1 4DT United Kingdom E-mail: sarah.brown@sheffield.ac.uk Lisa Farrell Department of Economics University of Melbourne Melbourne Victoria 3010 Australia John G. Sessions Department of Economics and International Development University of Bath Bath BA2 7AY United Kingdom Small Business Economics (2006) 26: 155–172 Ó Springer 2006 DOI 10.1007/s11187-004-6489-5