This paper shows that utility differences between the self-employed
and employees increase with financial development. This effect is
not explained by increased profits but by an increased value of non-
monetary benefits, in particular job independence. We interpret these
findings by building a simple occupational choice model in which financial constraints may impede the creation of firms and depress labor demand, thereby pushing some individuals into self-employment for lack
of salaried jobs. In this setting, financial development favors a better
matching between individual motivation and occupation, thereby increasing entrepreneurial utility despite increasing competition and so
reducing profits.
