The Skill Balancing Act: Determinants of and Returns to Balanced Skills
AbstractEntrepreneurs are found to have balanced skill sets and most have worked in small firms before starting their own business. In light of this, we compare the skill sets of employees working in businesses of different size to the skill sets of entrepreneurs using a rich data set on the applied skills of individuals. This data set allows us to construct an indicator that measures skill balance in the uantity (skill scope) and quality (skill level) dimension. Our results show that employees working in large businesses tend to have a lower skill balance than those working in small businesses; yet, the skill balance of entrepreneurs remains the largest. The impact of human capital formation on skill balance also varies among employees of different business sizes and entrepreneurs. Finally, the estimated returns to balanced skills are largest for entrepreneurs whereas, for employees, these returns decrease as business size increases. However, we find no relationship between balancing skills at lower skill levels and income, indicating that both dimensions - skill level and skill scope - are relevant. We end by discussing the policy implications that can be drawn from our results in regard to skill balance.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2011-025.
Date of creation: 07 Jun 2011
Date of revision:
entrepreneurship; returns to human capital; balanced skill set; jack-of-all-trades;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-BEC-2011-06-18 (Business Economics)
- NEP-ENT-2011-06-18 (Entrepreneurship)
- NEP-HRM-2011-06-18 (Human Capital & Human Resource Management)
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