Retirement and the transition to self-employment in Brazilian Metropolitan areas

Abstract This paper examines the transition from wage labor, formal or informal, to self-employment in metropolitan Brazil, in particular, the role of retirement in this process. It is important to understand the transitions that occur at the end of the working career, particularly the choice of self-employment, which has potential impacts on individual well-being. The data used are from the Monthly Employment Survey (PME), between the years 2002 to 2007. Using the pseudopainel methodology two main evidence was found. First, the greater the importance of retirement income relative to the income of wage labor, the lower the chance of transition. This result may indicate that older workers who depend on retirement for their survival have high aversion to risk involved in self-employment. In addition, informal workers are more likely to transition to self-employment than formal workers.