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The Skill Balancing Act: Determinants of and Returns to Balanced Skills

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  • Elisabeth Bublitz

    () (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Florian Noseleit

    () (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

Abstract

Entrepreneurs 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 Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2011-025.

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Date of creation: 07 Jun 2011
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Handle: RePEc:jrp:jrpwrp:2011-025

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Keywords: entrepreneurship; returns to human capital; balanced skill set; jack-of-all-trades;

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  1. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, vol. 97(2), pages 118-123, November.
  2. Hartog, Joop & van Praag, Mirjam & van der Sluis, Justin, 2008. "If You Are So Smart, Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs versus Employees," IZA Discussion Papers 3648, Institute for the Study of Labor (IZA).
  3. Ari Hyytinen & Mika Maliranta, 2008. "When Do Employees Leave Their Job for Entrepreneurship?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 1-21, 03.
  4. Thomas Astebro & Peter Thompson, 2007. "Entrepreneurs: Jacks of all Trades or Hobos?," Working Papers 0705, Florida International University, Department of Economics.
  5. Ljubica Nedelkoska & Frank Neffke, 2010. "Human Capital Mismatches along the Career Path," Jena Economic Research Papers 2010-051, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Uschi Backes-Gellner & Simone Tuor & Daniela Wettstein, 2010. "Differences between entrepreneurs and employees in their educational paths," Economics of Education Working Paper Series 0050, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
  8. Parker, Simon C, 2009. "Why do small firms produce the entrepreneurs?," The Journal of Socio-Economics, Elsevier, vol. 38(3), pages 484-494, June.
  9. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
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Cited by:
  1. Lechmann, Daniel S. J. & Schnabel, Claus, 2011. "Are the Self-Employed Really Jacks-of-All-Trades? Testing the Assumptions and Implications of Lazear's Theory of Entrepreneurship with German Data," IZA Discussion Papers 6157, Institute for the Study of Labor (IZA).
  2. Stuetzer, Michael & Obschonka, Martin & Schmitt-Rodermund, Eva, 2012. "Balanced skills among nascent entrepreneurs," MPRA Paper 37524, University Library of Munich, Germany.
  3. Michael Fritsch & Elisabeth Bublitz & Alina Rusakova & Michael Wyrwich, 2012. "How Much of a Socialist Legacy? The Reemergence of Entrepreneurship in the East German Transformation to a Market Economy," Jena Economic Research Papers 2012-042, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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