Ethnicity, Education, and Other Determinants of Self-Employment in Israel.

This is a study of the determinants of self-employment in Israel. We employ data for about 13,000 Israeli men and women who were twenty-seven to thirty-four years old in 1995. For each respondent we merged records from the 1983 and 1995 censuses as well as their parents' records in the 1983 census. We distinguish between three categories of self-employment: professional-managerial, qualified, and unqualified occupations. Our main findings are: (1) There are virtually no ethnic differences in the odds of self-employment of any one of the three categories. (2) The effect of education on self-employment in the qualified and unqualified classes is curvilinear: those with very low and very high levels of education are less likely to be self-employed than are those with intermediate levels of education. Evidently, the least educated are unlikely to succeed in business, and those with a university qualification have attractive alternatives as employees. By contrast, in the professional and managerial class, the effect of education is negative. (3) As expected, having a self-employed father enhances one's odds of self-employment. (4) More important, the effect of father's self-employment transfers across categories of self-employment. The sons and daughters of the self-employed in the unqualified class can climb to the class of qualified workers via self-employment. (5) Self-employment is enhanced by the economic circumstance of one's family of origin, suggesting that wealthier families can provide the resources for initial investment in the business and for keeping it afloat during periods of hardship. [ABSTRACT FROM AUTHOR]