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

Ari Hyytinen and Petri Rouvinen

No 1129, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: We examine how those re-entering paid-employment after a brief self-employment 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) self-employment, 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.

Keywords: self-employment; job mobility; earnings; wage differentials; selection (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008
New Economics Papers: this item is included in nep-eec, nep-ent and nep-lab
References: View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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