Propensity for Self-Employment in a Model of Occupational Choice: Evidence from a Cohort of Recent University Graduates in Spain

Abstract

This paper presents a microeconomic analysis of the occupational choices that individuals make after graduating from higher education. Specifically, a binomial logit model of the self-employment decision, which can be seen as a special case of a model of utility maximization, is estimated for a large, nationally representative sample of Spanish bachelor’s degree holders. The estimation of the logit model allows one to analyze the influence of the university degree and individual sociodemographic characteristics on the probability of becoming self-employed five years after graduation. Results show that graduates in Odontology, Physiotherapy, Architecture, Law, Fine Arts, Pharmacy, and Psychology are the most likely to become self-employed. Surprisingly, financially literate individuals (economics and finance-related undergraduate degree holders) are less likely to start their own businesses. The paper also shows that women are less likely to be self-employed than men, but those graduates whose mothers obtained a university degree have an increased likelihood of being self-employed. The paper highlights the need for career guidance for undergraduates contemplating a career in self-employment.