Alcohol Use and the Propensity for Self-Employment

Wesley A. Austin, Brandi N. Guidry


Considerable controversy surrounds the effects of alcohol use on labor market variables, and, while some issues have been addressed, important questions regarding employment outcomes persist. This article addresses the question of whether drinking leads, in causal ways, to lower rates of self-employment, which has implications for small business development. Using a large sample from the 2006 and 2007 National Survey on Drug Use and Health (NSDUH), an instrumental variable model is developed to estimate the causal impact of alcohol use on the probability of being self-employed. Extensive empirical testing is conducted to verify instrument strength and exogenity. Results indicate that drinking reduces the probability of self-employment and effects are relatively stable across instrument specifications.

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