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Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets

Emin Dinlersoz (), Henry Hyatt () and Hubert Janicki ()

Review of Economic Dynamics, 2019, vol. 34, 244-266

Abstract: Compared to more established firms, young firms tend to hire younger workers and provide them with lower earnings. To understand these facts, a dynamic model of entrepreneurship is constructed, where individuals can become entrepreneurs, or work in either a corporate or an entrepreneurial sector. Sectoral differences in production technology, financial constraints, and labor market frictions lead to sector-specific wages and worker sorting into the entrepreneurial sector by productivity and assets. Individuals with lower assets tend to accept jobs in the entrepreneurial sector, an implication that finds support in the data. The analysis indicates that sector-specific labor market frictions are critical to the model's ability to generate worker sorting and to match the key features of the entrepreneurial sector. (Copyright: Elsevier)

Keywords: Entrepreneurship; borrowing constraints; worker sorting; market frictions; employment dynamics (search for similar items in EconPapers)
JEL-codes: L26 J21 J22 J23 J24 J30 E21 E23 E24 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets (2016) Downloads
Working Paper: Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets (2015) Downloads
Working Paper: Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets (2015) Downloads
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DOI: 10.1016/j.red.2019.03.009

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