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The Labour Market Consequences of Self-employment Spells: European Evidence

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Author Info
Ari Hyytinen
Petri Rouvinen

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Abstract

ABSTRACT : We examine how those re-entering paid-employment after a brief self-employment spell fare upon return using data from the European Community Household Panel. Unconditionally, those re-entering paid-employment appear to have considerably lower wages than those staying in the wage sector. This difference appears to be larger in Europe than in the US. Conditional analysis suggests, however, that the difference is more apparent than real : It seems that Europeans select negatively into (and possibly out-of) self-employment, i.e., the likelihood of entering (and exiting) entrepreneurship correlates negatively with unobserved ability and/or in-paid-employment productivity. Our analysis of non-wage outcomes indicates that the selection is mostly involuntary and that for highly educated men, the brief self-employment spells are unemployment in disguise.

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Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1129.

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Length: 25 pages
Date of creation: 28 Mar 2008
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Handle: RePEc:rif:dpaper:1129

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Related research
Keywords: self-employment; job mobility; earnings; wage differentials; selection;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Terttu Luukkonen, 2007. "Understanding Strategies of the Venture Capital Investors in Helping Their Portfolio Firms to Become International," Discussion Papers 1099, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Olavi Rantala, 2008. "Sosiaalietuuksien rahoituksen alueelliset kuluttajahintavaikutukset," Discussion Papers 1125, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Antti Lönnqvist, 2007. "Intellectual Capital and Productivity: Identification and the Measurement of the Relationship at Company-level," Discussion Papers 1108, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Mika Maliranta & Satu Nurmi, 2007. "Does Foreign Presence Stimulate Creative Destruction in Local Markets," Discussion Papers 1114, The Research Institute of the Finnish Economy. [Downloadable!]
  5. Hyytinen, Ari & Rouvinen, Petri, 2008. "The labour market consequences of self-employment spells: European evidence," Labour Economics, Elsevier, vol. 15(2), pages 246-271, April. [Downloadable!] (restricted)
    Other versions:
  6. Sarianna M. Lundan, 2007. "The Home Country Effects of Internationalisation," Discussion Papers 1100, The Research Institute of the Finnish Economy. [Downloadable!]
  7. Maliranta, Mika & Mohnen, Pierre & Rouvinen, Petri, 2008. "Is Inter-Firm Labor Mobility a Channel of Knowledge spillovers? Evidence from a Linked Employer-Employee Panel," UNU-MERIT Working Paper Series 005, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
    Other versions:
  8. Mika Maliranta & Satu Nurmi & Hanna Virtanen, 2008. "It takes three to tango in employment: Matching vocational education organisations, students and companies in labour market," Economics of Education Working Paper Series 0022, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  9. Mika Pajarinen & Petri Rouvinen, 2008. "Verkostoitumisen yhteys yritysten kannattavuuteen ja kasvuun: empiirisiä havaintoja," Discussion Papers 1118, The Research Institute of the Finnish Economy. [Downloadable!]
  10. Johansson, Edvard & Böckerman, Petri & Uutela, Antti, 2007. "Alcohol Consumption and Sickness Absence: Evidence from Panel Data," MPRA Paper 6398, University Library of Munich, Germany. [Downloadable!]
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  11. Derek C. Jones & Panu Kalmi & Takao Kato & Mikko Mäkinen, 2008. "The Effects of Human Resource Management Practices on Firm Performance - Preliminary Evidence from Finland," Discussion Papers 1121, The Research Institute of the Finnish Economy. [Downloadable!]
  12. Ville Kaitila & Kari E. O. Alho & Nuutti Nikula, 2007. "Growth Prospects of Emerging Market Economies in Europe - How Fast Will They Catch up with the Old West?," Discussion Papers 1115, The Research Institute of the Finnish Economy. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fares, Jean & Tiongson, Erwin R., 2007. "Youth unemployment, labor market transitions, and scarring : evidence from Bosnia and Herzegovina, 2001-04," Policy Research Working Paper Series 4183, The World Bank. [Downloadable!]
  2. Mika Maliranta & Petri Rouvinen & Aarno Airaksinen, 2008. "IT Outsourcing in Finnish Business," Discussion Papers 1140, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Fernando Munoz-Bullon & Begona Cueto Iglesias, 2008. "The sustainability of start-up firms among formerly wage workers," Business Economics Working Papers wb083108, Universidad Carlos III, Departamento de Economía de la Empresa. [Downloadable!]
  4. Ari Hyytinen & Petri Rouvinen, 2008. "The Labour Market Consequences of Self-employment Spells: European Evidence," Discussion Papers 1129, The Research Institute of the Finnish Economy. [Downloadable!]
    Other versions:
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