Essays on Self-employment, the Gig Economy, and Labor Market Policy

Abstract

What options are available to a worker who loses their job today? For many, self-employment provides an alternative source of income in the absence of wage employment. The recent rise of digital labor platforms has introduced a new form of self-employment—commonly referred to as "gig work"—characterized by immediate and flexible access to income-generating opportunities. A decade ago, most such platforms were virtually nonexistent; today, they account for a sizable share of labor market activity, particularly among lower-income workers. Despite growing attention, the aggregate effects of gig work remain insufficiently understood. This dissertation aims to fill this gap by developing a macroeconomic model and analyzing how the expansion of gig work reshapes economic outcomes and policies. Chapter 1 examines gig work as a novel form of self-employment that offers insurance against labor market risk. I develop a quantitative model that captures distinct characteristics of gig jobs—such as low entry barriers, high flexibility, and relatively low earnings—and calibrate it to replicate key patterns in the U.S. labor market. The results show that the availability of gig work reduces unemployment, particularly benefiting low-skilled and low-wealth individuals. Welfare improves, especially for unemployed workers who are ineligible for unemployment insurance, as gig work provides an alternative form of income support. However, aggregate productivity declines due to a shift of labor into the low-productivity sector. Transition dynamics reveal a trade-off: while gig work cushions the rise in unemployment during economic downturns, it also slows recovery. Policymakers should consider this trade-off when considering how to regulate gig work. Building on these insights, Chapter 2 investigates how the availability of fallback self-employment—especially flexible gig work—alters the effectiveness of labor market policies. I evaluate five key policy instruments: unemployment insurance (UI), firing costs, worker bargaining power (unionization), hiring subsidies, and job-matching efficiency improvements. Counterfactual simulations reveal that policy effects vary significantly depending on whether fallback work is available and how workers transition across occupations. Gig work amplifies the effects of UI benefit changes, mitigates the adverse impact of higher firing costs and stronger bargaining power, and reduces the effectiveness of active labor market programs. These effects operate primarily through gig work's role as an insurance mechanism and a substitute for unemployment. These findings highlight the importance of designing labor market policies that account for the growing prevalence of flexible employment arrangements.