Sorting on Unobserved Skills into New Firms

Polina Knutsson ()
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Polina Knutsson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

No 2018:38, Working Papers from Lund University, Department of Economics

Abstract: Human capital features prominently in theoretical work on post-entry performance of new firms. Empirical analysis has, however, to a large extent overlooked the unobserved component of human capital focusing on years of education or labor market experience. This paper adds to the literature on worker characteristics and post-entry firm performance by putting the unobserved quality of workers in the center of analysis. I find strong evidence that new firms on average employ workers of lower unobserved quality relative to incumbent firms. Among new firms workers of higher unobserved quality are overrepresented in spin-offs and incorporated new firms. I further show that unobserved quality of workers is important for the post-entry performance of firms as it is a strong predictor of new firm survival.

Keywords: Human capital; occupational choice; sorting; new firms (search for similar items in EconPapers)
JEL-codes: J24 J60 M13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-11-29
New Economics Papers: this item is included in nep-bec, nep-ent, nep-hrm, nep-lma and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2018_038

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