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Becoming an Entrepreneur

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  • Patricio Valenzuela
  • Hugo R. Ñopo

Abstract

Using the 1996-2001 Chilean CASEN Panel Survey, this paper analyzes the impact on income of the switch from salaried employment to entrepreneurship (self-employment and leadership of micro-enterprises). By means of a difference-in-differences non-parametric matching estimator the paper alleviates problems of selection bias (on observable and unobservable traits) and creates the appropriate counterfactuals of interest. The results indicate that the income gains associated with the switch from salaried employment to entrepreneurship are positive, statistically significant and financially substantial. Even more, the results are qualitatively the same using mean and medians, suggesting that the impacts are not influenced by the presence of few superstar winners. Additionally, the income changes associated with the reverse switches (from self-employment to salaried jobs) are negative. The results also suggest interesting gender differences, as females show higher gains than males on the switch from salaried jobs to entrepreneurship and lower losses on the reverse switch.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 6844.

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Date of creation: Mar 2007
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Handle: RePEc:idb:brikps:6844

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Keywords: Labor Policy; WP-605;

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References

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  1. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 208-211, May.
  2. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 519-35, June.
  3. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 581-605, June.
  4. Nopo, Hugo & Saavedra, Jaime & Torero, Maximo, 2004. "Ethnicity and Earnings in Urban Peru," IZA Discussion Papers 980, Institute for the Study of Labor (IZA).
  5. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, Elsevier, vol. 97(2), pages 118-123, November.
  6. Hege Gulli, . "Microfinance and Poverty: Questioning the Conventional Wisdom Title: Microfinanzas y pobreza: ¿Son válidas las ideas preconcebidas?," IDB Publications 79506, Inter-American Development Bank.
  7. Hugo Ñopo & Jaime Saavedra & Máximo Torero, 2007. "Ethnicity and Earnings in a Mixed-Race Labor Market," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 709-734.
  8. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(3), pages 604-631, June.
  9. Eduardo Engel & Alexander Galetovic & Claudio Raddatz, 1998. "Reforma tributaria y distribución del ingreso en Chile," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 40, Centro de Economía Aplicada, Universidad de Chile.
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Cited by:
  1. Corrado Giulietti & Guangjie Ning & Klaus F. Zimmermann, 2012. "Self-employment of rural-to-urban migrants in China," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 33(1), pages 96-117, June.
  2. Federico S. Mandelman & Gabriel V. Montes Rojas, 2007. "Microentrepreneurship and the business cycle: is self-employment a desired outcome?," Working Paper, Federal Reserve Bank of Atlanta 2007-15, Federal Reserve Bank of Atlanta.
  3. Mandelman, Federico S. & Montes-Rojas, Gabriel V., 2009. "Is Self-employment and Micro-entrepreneurship a Desired Outcome?," World Development, Elsevier, Elsevier, vol. 37(12), pages 1914-1925, December.
  4. Sanchez Puerta, Maria Laura, 2010. "Labor market policy research for developing countries : recent examples from the literature - what do we know and what should we know?," Social Protection Discussion Papers 52999, The World Bank.

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