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The Impact on Earnings When Entering Self-Employment: Evidence for Germany

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  • Johannes Martin

Abstract

Using data of the German Socio-Economic Panel (GSOEP) earnings differentials between self-employed and wage-employed workers in the German labor market are explored. Previous research based on US data reports lower incomes for entrepreneurs. In contrast to that, the findings of this contribution suggest the opposite for German entrepreneurs. They have considerably higher earnings than wage-employed workers. Furthermore, there is a significant and positive effect on earnings when entering self-employment. This holds true when it is also taken into account that workers usually report a smaller firm size and work longer after beginning an entrepreneurial occupation.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.415686.de/diw_sp0537.pdf
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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 537.

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Length: 36 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp537

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Keywords: Self-employment; Human Capital; Earnings; GSOEP; Entrepreneurship;

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References

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  1. Jörn Block & Philipp Sandner & Marcus Wagner & Marc Weiglein, 2009. "Unternehmensgründungen von Ausländern in Deutschland: Einkommenseffekte und Implikationen für die Gründungslehre," SOEPpapers on Multidisciplinary Panel Data Research 196, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Roy Thurik & Isabel Grilo, 2006. "Latent and actual entrepreneurship in Europe and the US: some recent developments," Scales Research Reports, EIM Business and Policy Research N200514, EIM Business and Policy Research.
  3. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2014. "Personality characteristics and the decisions to become and stay self-employed," Small Business Economics, Springer, Springer, vol. 42(4), pages 787-814, April.
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  5. Williams, Donald R., 2002. "Returns to education and experience in self-employment: Evidence from Germany," IRISS Working Paper Series, IRISS at CEPS/INSTEAD 2002-04, IRISS at CEPS/INSTEAD.
  6. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 606-20, September.
  7. Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(2), pages 275-96, May.
  8. Parker,Simon C., 2006. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521030632.
  9. Koellinger, Philipp & Minniti, Maria & Schade, Christian, 2007. ""I think I can, I think I can": Overconfidence and entrepreneurial behavior," Journal of Economic Psychology, Elsevier, Elsevier, vol. 28(4), pages 502-527, August.
  10. Daiji Kawaguchi, 2002. "Compensating Wage Differentials among Self-Employed Workers:Evidence from Job Satisfaction Scores," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0568, Institute of Social and Economic Research, Osaka University.
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  12. Yannis Georgellis & Howard J. Wall, 2004. "Gender differences in self-employment," Working Papers, Federal Reserve Bank of St. Louis 1999-008, Federal Reserve Bank of St. Louis.
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  15. Block, Joern & Wagner, Marcus, 2006. "Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials," MPRA Paper 610, University Library of Munich, Germany.
  16. Bruno Frey & Matthias Benz, 2003. "Being Independent is a Great Thing: Subjective Evaluations of Self-Employment and Hierarchy," CESifo Working Paper Series 959, CESifo Group Munich.
  17. Block, J.H. & Koellinger, Ph.D., 2008. "I Can’t Get No Satisfaction - Necessity Entrepreneurship and Procedural Utility," ERIM Report Series Research in Management, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasm ERS-2008-051-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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  19. Edvard Johansson, 2000. "Self-employment and the predicted earnings differential - evidence from Finland," Finnish Economic Papers, Finnish Economic Association, Finnish Economic Association, vol. 13(1), pages 45-55, Spring.
  20. Mats Hammarstedt, 2009. "Predicted earnings and the propensity for self-employment: Evidence from Sweden," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 30(4), pages 349-359, July.
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Cited by:
  1. Lechmann, Daniel S. J., 2013. "Can working conditions explain the return-to-entrepreneurship puzzle?," Discussion Papers, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics 86, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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