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An Empirical Study of the Transition from Paid Work to Self-Employment


  • S. Ramakrishna Velamuri

    (University of Navarra)

  • S. Venkataraman

    (University of Virginia)


We explore the transition from paid work to self-employment using three explanatory variables: paid income, predicted income, and income for ability. We find no linear relationship between the three variables and the self-employment transition. We then test for curvilinear relationships. We find that individuals with low incomes are more likely to take up self-employment. Further, income for ability is the strongest predictor of the transition to self-employment. The relationship between ability and self-employment is U-shaped: very low ability and very high ability individuals are more likely to take up self-employment.

Suggested Citation

  • S. Ramakrishna Velamuri & S. Venkataraman, 2005. "An Empirical Study of the Transition from Paid Work to Self-Employment," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 10(1), pages 1-16, Spring.
  • Handle: RePEc:pep:journl:v:10:y:2005:i:1:p:1-16

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    Cited by:

    1. Gumus, Gulcin & Regan, Tracy L., 2015. "Self-employment and the role of health insurance in the U.S," Journal of Business Venturing, Elsevier, vol. 30(3), pages 357-374.

    More about this item


    Self Employment; Labor Demand;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups


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