August 2005

IZA DP No. 1712: Entrepreneurship Among Married Couples in the United States: A Simultaneous Probit Approach

published in: Labour Economics, 2008, 15 (3), 515-537

This article proposes a simultaneous probit equation framework to analyse the business ownership patterns of married couples in the United States. A structural model of knowledge spillovers within couples is formulated and estimated. Empirical analysis reveals significant and substantial positive interdependence of business ownership propensities within couples. We argue that the evidence is consistent with both male and female spouses receiving positive knowledge transfers from the other. Conversely, there appears to be little support for alternative explanations of interdependent occupational choices based on assortative mating, role model effects, risk diversification, or intrahousehold wealth transfers. We conclude that the conventional practice of ignoring occupational interdependence can generate misleading conclusions about the determinants of business ownership in America.