Stars and Misfits: Self-Employment and Labor Market Frictions

Abstract

Recent evidence has shown that entrants into self-employment are disproportionately drawn from the tails of the earnings and ability distributions. This observation is explained by a multi-task model of occupational choice in which frictions in the labor market induces mismatches between firms and workers, and mis-assignment of workers to tasks. The model also yields distinctive predictions relating prior work histories to earnings and to the probability of entry into self-employment. These predictions are tested with the Korean Labor and Income Panel Study, from which we find considerable support for the model. JEL Classification Codes: J24, L26.

Skill Balance and Entrepreneurship Evidence from Online Career Histories

“…Silva interprets the cross-sectional results as the consequence of selection on unobservables, while the panel estimates lead him to reject the notion that job-hopping reflects investment in skill accumulation. Astebro, Chen and Thompson (2011) obtain similar results with a large Korean panel; they find that variety is positively associated with entry into entrepreneurship in the cross section but not in panel estimates.…”

Entrepreneurship and income inequality

“…In the empirical model, we consider the following explanatory variables: age and age squared, job tenure and job tenure squared, job changes, and years of education (e.g., Folta et al, 2010;Yamauchi, 2001;Åstebro et al, 2011). All individuals living in Sweden receive a personal identification number based on their date of birth.…”

“…Despite these two parallel economic trends, studies that probe the direct relationship between entrepreneurship and overall workforce inequality remain scant in the still largely separate literatures on entrepreneurship and inequality ( Van and Versloot, 2007;Wright and Zahra, 2011). In the entrepreneurship literature, many studies have documented a two-pronged effect of entrepreneurship on individual income, arguing that entrepreneurship is a source of enhanced income mobility for some but results in lowerthan-average incomes for the large fraction of the self-employed workforce (e.g., Hamilton, 2000;Åstebro et al, 2011). However, attention to the potential implications of these patterns for macro-level income distribution has been scant in the entrepreneurship literature.…”

Spatial Determinants of Entrepreneurship in India

“…Due to 6 the much larger raw count of self-employed workers, self-employment indices accord much more weight to small-scale, independent businesses and hobby entrepreneurship than entrepreneurship that can lead to substantial job creation for others. The vast majority of selfemployment businesses as captured on labor and census surveys will not generate employment opportunities for other workers, and they may even be the product of a lack of employment opportunities for the business owner (e.g., Astebro et al 2010, Schoar 2009). This latter factor is particularly acute in South Asia given its earlier development and large, persistent informal sector.…”