The economic consequences of exiting self-employment in later life

This study examines the post-exit labor-income and wealth dynamics associated with self-employment exit among older individuals approaching retirement, using longitudinal data from the Korean Longitudinal Study of Aging (2006–2022). The analysis shows that late-life transitions out of self-employment are associated with a significant and persistent reduction in labor income: earnings are 9.7% lower immediately after exit, relative to the pre-exit level, and remain 15.0% below that level six years later. Additional evidence suggests that this pattern partly reflects the loss of occupation-specific human capital. In contrast, the estimated effects on non-housing wealth are statistically insignificant in both the short and long term. Income losses are particularly pronounced among individuals aged 61 or older and those with higher educational attainment, whereas wealth declines are more evident among comparatively younger members of the older population and among the highly educated. These findings underscore the importance of incorporating post-exit income risks into models of late-life career choice and have policy implications for mitigating income disruptions among older self-employed individuals.