Consequences of self-employment for women and men in the United States

The labour market consequences of self-employment spells: European evidence

“…Following Williams (2000) and Bruce and Schuetze (2004), we use the logarithm of (either net or gross) hourly wage at the beginning of the five-year window as our first-cut control for the potential endogeneity of self-employment and unemployment experience. The rationale for using this control is the same as that of using the difference-in-differences estimate: Workers who become self-employed (or unemployed) for a short spell may do so because of their low productivity (and thus poor earnings capacity) in the wage sector.…”

“…The press release of the new action plan on entrepreneurship (EC, 2004b, p. 1) outlines "… key actions in five strategic areas… reducing the stigma of failure…". The (former) Commissioner Liikanen (Enterprise and the Informa-This paper investigates whether the anecdotes and policy-makers' (somewhat pessimistic) views on the consequences of the short self-employment spells are supported by European labour market data: If the data backs the apparently strong prior perception, an additional year of self-employment should not only lower the earnings (of an exiting entrepreneur) relative to an additional year of paidemployment: It should lower them considerably and the effect should be larger in Europe than what has been documented for the US (by, e.g., Bruce and Schuetze, 2004;Williams, 2000).…”

The Labour Market Consequences of Self-Employment Spells: European Evidence

“…Yet we cannot exclude the possibility that the effects of lost experience in paid-employment are heterogeneous. Williams (2000) argues, for example, that individuals' ability to maintain their human capital outside paid-employment may vary across industries and would-be wage occupations. We consider therefore the possibility that the effects of self-employment (and unemployment) spells depend on the (initial) level of formal education an individual has.…”

“…There is some evidence for the US on how those who revert back to paid-employment fare upon return (Bruce and Schuetze, 2004;Evans and Leighton, 1989;Williams, 2000). This evidence suggests that a year of self-employment lowers earnings compared to a year of work experience, even though not all findings for the US are entirely consistent with each other or across different demographic groups.…”

“…Such a stigma may emerge as an endogenous social norm (Landier, 2002) and hardly improves the position of an exiting entrepreneur in any market he enters upon return, be it the capital or the labour market (Gromb and Scharfstein, 2002). Earnings (or employment prospects) may also reduce if short self-employment spells erode or stagnate previously acquired job-specific skills (and, more generally, erode people's human capital; see, e.g., Bruce and Schuetze, 2004;Williams, 2000). 6 While these are plausible explanations for the policy-makers' perception as well as for any ex post (end-of-period) wage difference between those with and without self-employment experience, the hostility of the European labour markets against exiting entrepreneurs may be more apparent than real.…”