The Transformation of Self Employment

Innessa Colaiacovo, Margaret G. Dalton, Sari Pekkala Kerr and William Kerr

No 29725, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.

JEL-codes: D24 G51 J11 J24 J62 L26 M13 R11 R13 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-cwa, nep-ent, nep-lma and nep-sbm
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Working Paper: The Transformation of Self Employment (2022)
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