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

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu No. 1129 Ari Hyytinen* -Petri Rouvinen** Terms of use: Documents in Keskusteluaiheita -Discussion papers THE LABOUR MARKET CONSEQUENCES OF SELF-EMPLOYMENT SPELLS: EUROPEAN EVIDENCE ABSTRACT:We examine how those re-entering paid-employment after a brief selfemployment spell fare upon return using data from the European Community Household Panel. Unconditionally, those re-entering paid-employment appear to have considerably lower wages than those staying in the wage sector. This difference appears to be larger in Europe than in the US. Conditional analysis suggests, however, that the difference is more apparent than real: It seems that Europeans select negatively into (and possibly out-of) selfemployment, i.e., the likelihood of entering (and exiting) entrepreneurship correlates negatively with unobserved ability and/or in-paid-employment productivity. Our analysis of non-wage outcomes indicates that the selection is mostly involuntary and that for highly educated men, the brief self-employment spells are unemployment in disguise.JEL CODES: J230, J240, J310.

Habitual entrepreneurs in the making: how labour market rigidity and employment affects entrepreneurial re-entry

“…Such a pattern would be consistent with other European evidence suggestive of entrepreneurial experience not being seen favorable by employees (Hyytinen and Rouvinen 2008).…”

“…employment and dampening the demand for labour (Autor et al 2007), effectively raising the thresholds for, and decreasing the probability of, attaining paid employment (Lindbeck and Snower 1986). Individuals with entrepreneurial experiences often have career breaks due to having taken time off to develop their own business (Hyytinen and Rouvinen 2008). The relevance and consistency of their work experiences can therefore sometimes be called into question when they try to make a shift from selfemployed to wage earners.…”

The entrepreneur's mode of entry: Business takeover or new venture start?

“…Human capital theory suggests that formal human capital is the most versatile, since it generates high returns in paid-employment as well as entrepreneurship (Card, 2001;Oreopoulos, 2006;Parker and van Praag, 2006;Van Praag et al, 2009). In contrast, there is no clear cut evidence of the value of prior experience of business ownership outside of business ownership, where its e¤ects can even be negative (Bruce and Schuetze, 2004;Landier, 2004;Hyytinen and Rouvinen, 2008).…”

Hybrid Entrepreneurship

“…Building from the literature on -moonlighting‖ in a second wage job, this logic suggests that individuals engage in hybrid entrepreneurship if they have a lower salary in a primary job and a lower non-salary income, are married, and have more children (Kimmel andConway 2001, Renna 2006). 6 It is unclear, however, whether these qualities are distinguishable from those who enter immediately in self-employment, because there is evidence that those with low income select into self-employment (Bruce and Schuetze, 2004;Hyytinen and Rouvinen, 2008 hybrid entrepreneurs are willing to sacrifice salary income to get these psychological benefits, much like the self-employed (Hamilton, 2000). Why would individuals prefer receiving nonmonetary benefits as hybrids rather than self-employed?…”