IDEAS home Printed from
   My bibliography  Save this paper

Education and Self-Employment: Relationships between Earnings and Wealth Inequality


  • Yaz Terajima

    () (Monetary and Financial Analysis Bank of Canada)


This paper quantitatively studies the interaction of education and occupation choices and its implication in accounting for changes in the relative wealth of households over 1983-2001 in the United States. Among households whose head is a college graduate, the ratio of the average household wealth between the self-employed and workers has increased by 137%. At the same time, the ratio of average household earnings between them has increased by 57%. These observations show that wealth inequality as well as earnings inequality have increased over this period. Are changes in relative average earnings sucient in accounting for changes in relative average wealth? I build on a model of wealth distribution to include education and occupation choices, where earnings are dictated by education-occupation speci c productivity processes. By calibrating these productivity processes to match the earnings observations separately for 1983 and 2001, I quantitatively derive how much this exercise can account for the changes in the relative average wealth of college self-employed households. The results show that it can account for one-third of the change in the relative average wealth between college self-employed and college worker households. This study can identify some institutional changes which could further account for the changes in the wealth inequality observed in the data over the period

Suggested Citation

  • Yaz Terajima, 2005. "Education and Self-Employment: Relationships between Earnings and Wealth Inequality," Computing in Economics and Finance 2005 423, Society for Computational Economics.
  • Handle: RePEc:sce:scecf5:423

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Campanale Claudio, 2010. "Private Equity Returns in a Model of Entrepreneurial Choice with Learning," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-37, July.
    2. Akyol, Ahmet & Athreya, Kartik, 2011. "Credit and self-employment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 363-385, March.

    More about this item


    Self-Employment; Education; Earnings Inequality; Wealth Inequality;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf5:423. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.