Job Flexibility and Occupational Selection: An Application of Maximum Simulated Likelihood Using Data from Ghana

In many African labour markets, the vast majority of self-employed workers are female. It is often hypothesised that this is because self-employment enables workers to balance income-generation with caring for children and other domestic tasks and, since responsibility for these activities is divided unequally in the household, this effect is stronger for women than men. However, testing whether 'job flexibility' matters is difficult because variables that proxy for domestic obligations | such as the number of dependents in the household | may be endogenous to occupational choice. In this paper, we build a new estimator using maximum simulated likelihood, which allows us to couch the idea that selection on observables can be used as a guide to selection on unobservables within the multinomial choice problem individuals face when they select their occupations. We test this approach using detailed cross-sectional data from Ghana. Our results show that having extra dependents in the household pushes women towards low-input self-employment substantially more than men.