Who becomes an entrepreneur? Labor market prospects and occupational choice

Markus Poschke

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 3, 693-710

Abstract: This paper provides new theory and evidence on the relationship between ability and entrepreneurship. I show that there is a U-shaped relationship between the probability of entrepreneurship and both a person's schooling and wage when employed. This pattern can be explained in a model of occupational choice between wage work and entrepreneurship where a firm's productivity is uncertain before entry, potential wages are heterogeneous, and expected productivity is positively related to an entrepreneur's potential wage. Search, or the ability to keep good projects and reject bad ones, attracts low-ability agents into entrepreneurship. The model also explains why low-profit firms do not always exit.

Keywords: Occupational choice; Entrepreneurship; Firm entry; Selection; Search (search for similar items in EconPapers)
JEL-codes: E20 J23 L11 L16 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (101)

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Related works:
Working Paper: Who Becomes an Entrepreneur? Labor Market Prospects and Occupational Choice (2012)
Working Paper: Who Becomes an Entrepreneur? Labor Market Prospects and Occupational Choice (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:3:p:693-710

DOI: 10.1016/j.jedc.2012.11.003

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