(Why) Do self-employed parents have more children?

Using data from the U.S. Census, we find that married self-employed men have between 0.1 and 0.2 more children as compared to if they are not self-employed. This is consistent with the hypothesis that self-employed households have a preference for larger families to raise the likelihood that an inside family member will be a good match at running the business. This empirical relationship is established using a regression framework, including the use of instrumental variables estimation to allow for the possibility of endogeneity of the respondent’s self-employment status and whether the respondent’s spouse stays at home. Moreover, we find a slightly higher demand for sons among the self employed who are over 40 at the time of the 1990 U.S. Census: namely, given the exogenous variation in gender mix of prior children, self employed parents born prior to 1950 appear to have an increased demand for a third child if the first two children were not sons. This effect does disappear, however, for the later generation of respondents.