Does the timing of the transition into informal self-employment follow a life-cycle pattern where credit-constrained workers first accumulate capital in the formal sector? Or does self-employment correspond better to a traditional safety-net for the unemployed? Gonzalez and Maloney derive a...

The authors derive a methodology for analyzing logit models in a rotating panel context. They then apply the technique to test two theories of why and when salaried workers enter the informal self-employed sector. In the traditional view, workers fired from formal jobs queue in the informal...