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In this article, we develop an urban model for self-employment where leisure and effort at work are complementary. Our model shows that unemployment tends to be concentrated far from business districts, in contrast to employment and self-employment. The self-employed tend to live closer to workplaces than do the employed, as commuting affects productivity and thus earnings. We use the American Time Use Survey to test the model and find that employment and self-employment are negatively related to commuting, in comparison to unemployment, while self-employment is associated with shorter commutes, giving support to the theoretical background.

Modelling the location of self-employed workers in urban areas