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Is self-employment really a bad experience?: The effects of previous self-employment on subsequent wage-employment wages

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  • Kaiser, Ulrich
  • Malchow-Møller, Nikolaj

Abstract

We use propensity score matching methods to quantify the effects of past self-employment experience on subsequent earnings in dependent employment using data on the population of Danish men observed between 1990 and 1996. Our results generally confirm existing studies in that we find that a spell of self-employment is associated with lower hourly wages compared to workers who were consecutively wage-employed. We also show, however, that this effect disappears--and even becomes positive in some settings--for formerly self-employed who find dependent employment in the same sector as their self-employment sector. Hence, the on average negative effect of self-employment is rather caused by sector switching than by the self-employment experience per se. Moreover, formerly self-employed who either enjoyed a high income or hired at least one worker during their self-employment spell receive wages in subsequent dependent employment that are at least as high as for individuals who have been consecutively wage-employed.

Suggested Citation

  • Kaiser, Ulrich & Malchow-Møller, Nikolaj, 2011. "Is self-employment really a bad experience?: The effects of previous self-employment on subsequent wage-employment wages," Journal of Business Venturing, Elsevier, vol. 26(5), pages 572-588, September.
  • Handle: RePEc:eee:jbvent:v:26:y:2011:i:5:p:572-588
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    Cited by:

    1. Failla, Virgilio & Melillo, Francesca & Reichstein, Toke, 2017. "Entrepreneurship and employment stability — Job matching, labour market value, and personal commitment," Journal of Business Venturing, Elsevier, vol. 32(2), pages 162-177.
    2. Baptista, Rui & Lima, Francisco & Preto, Miguel Torres, 2012. "How former business owners fare in the labor market? Job assignment and earnings," European Economic Review, Elsevier, vol. 56(2), pages 263-276.
    3. Nelli S. Gazanchyan & Nigar Hashimzade & Yulia Rodionova & Natalia Vershinina, 2017. "Gender, Access to Finance, Occupational Choice, and Business Performance," CESifo Working Paper Series 6353, CESifo Group Munich.
    4. Rotger, Gabriel Pons & Gørtz, Mette & Storey, David J., 2012. "Assessing the effectiveness of guided preparation for new venture creation and performance: Theory and practice," Journal of Business Venturing, Elsevier, vol. 27(4), pages 506-521.
    5. Kristina Nyström & Gulzat Elvung, 2014. "New firms and labor market entrants: Is there a wage penalty for employment in new firms?," Small Business Economics, Springer, vol. 43(2), pages 399-410, August.
    6. Nyström, Kristina, 2015. "Pre- and post-entrepreneurship labor mobility of entrepreneurs and employees in entrepreneurial firms," Working Paper Series in Economics and Institutions of Innovation 420, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    7. repec:rdg:wpaper:em-dp2013-01 is not listed on IDEAS
    8. Nigar Hashimzade & Yulia Rodionova, 2013. "Gender Bias in Access to Finance, Occupational Choice, and Business Performance," Economics & Management Discussion Papers em-dp2013-01, Henley Business School, Reading University.

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