Staff Reports
Self-Employment and Labor Market Risks
Number 1085
January 2024

JEL classification: J40, J64, J65

Authors: Richard Audoly

I study the labor market risks associated with being self-employed. I document that the self-employed are subject to larger earnings fluctuations than employees and that they frequently transition into unemployment. Given that the self-employed are not eligible to unemployment insurance, I analyze the provision of benefits targeted at these risks using a calibrated search model with (i) precautionary savings, (ii) work opportunities in paid and self-employment, and (iii) skill heterogeneity. This exercise suggests that extending the current U.S. unemployment insurance scheme to the self-employed comes with a clear increase in the transition rate from self-employment to unemployment and an unequal benefits-to-contributions ratio across skill groups. At the calibrated parameters, the self-employed in the middle of the skill distribution lose welfare.

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Author Disclosure Statement(s)
Richard Audoly
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at
Suggested Citation:
Audoly, Richard. 2024. “Self-Employment and Labor Market Risks.” Federal Reserve Bank of New York Staff Reports, no. 1085, January.

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