IDEAS home Printed from https://ideas.repec.org/p/cen/wpaper/22-03.html
   My bibliography  Save this paper

The Transformation of Self Employment

Author

Listed:
  • Innessa Colaiacovo
  • Margaret Dalton
  • Sari Pekkala Kerr
  • William R. Kerr

Abstract

Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in “hometown” local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.

Suggested Citation

  • Innessa Colaiacovo & Margaret Dalton & Sari Pekkala Kerr & William R. Kerr, 2022. "The Transformation of Self Employment," Working Papers 22-03, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:22-03
    as

    Download full text from publisher

    File URL: https://www2.census.gov/ces/wp/2022/CES-WP-22-03.pdf
    File Function: First version, 2022
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    2. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
    3. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
    4. Pedro Bento & Diego Restuccia, 2019. "The Role of Nonemployers in Business Dynamism and Aggregate Productivity," NBER Working Papers 25998, National Bureau of Economic Research, Inc.
    5. Pierre Azoulay & Benjamin F. Jones & J. Daniel Kim & Javier Miranda, 2020. "Age and High-Growth Entrepreneurship," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 65-82, March.
    6. Thomas Astebro & Holger Herz & Ramana Nanda & Roberto A. Weber, 2014. "Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 49-70, Summer.
    7. Daron Acemoglu & Ufuk Akcigit & Harun Alp & Nicholas Bloom & William Kerr, 2018. "Innovation, Reallocation, and Growth," American Economic Review, American Economic Association, vol. 108(11), pages 3450-3491, November.
    8. Jake Bradley, 2016. "Self-employment in an equilibrium model of the labor market," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-30, December.
    9. Ryan Decker & John Haltiwanger & Ron Jarmin & Javier Miranda, 2014. "The Role of Entrepreneurship in US Job Creation and Economic Dynamism," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 3-24, Summer.
    10. Michael S. Dahl & Olav Sorenson, 2012. "Home Sweet Home: Entrepreneurs' Location Choices and the Performance of Their Ventures," Management Science, INFORMS, vol. 58(6), pages 1059-1071, June.
    11. Jean‐Noël Barrot & Ramana Nanda, 2020. "The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform," Journal of Finance, American Finance Association, vol. 75(6), pages 3139-3173, December.
    12. David B. Audretsch & Oliver Falck & Maryann P. Feldman & Stephan Heblich, 2012. "Local Entrepreneurship in Context," Regional Studies, Taylor & Francis Journals, vol. 46(3), pages 379-389, April.
    13. Alon, Titan & Berger, David & Dent, Robert & Pugsley, Benjamin, 2018. "Older and slower: The startup deficit’s lasting effects on aggregate productivity growth," Journal of Monetary Economics, Elsevier, vol. 93(C), pages 68-85.
    14. Ufuk Akcigit & Sina T. Ates, 2023. "What Happened to US Business Dynamism?," Journal of Political Economy, University of Chicago Press, vol. 131(8), pages 2059-2124.
    15. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, And Entrepreneurship Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 279-306, June.
    16. Marco Cagetti & Mariacristina De Nardi, 2006. "Entrepreneurship, Frictions, and Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 835-870, October.
    17. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    18. Jean-Noël Barrot, 2016. "Trade Credit and Industry Dynamics: Evidence from Trucking Firms," Journal of Finance, American Finance Association, vol. 71(5), pages 1975-2016, October.
    19. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Surbhi Kesar & Snehashish Bhattacharya & Lopamudra Banerjee, 2022. "Contradictions and Crisis in the World of Work: Informality, Precarity and the Pandemic," Development and Change, International Institute of Social Studies, vol. 53(6), pages 1254-1282, November.
    2. Christel Gilles & Alain Trannoy & Antoine Baéna & Léa Flamand & Manal Tannani, 2022. "Quelles performances des entreprises créées par les séniors ?," Working Papers hal-04001005, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kerr, Sari Pekkala & Kerr, William R. & Nanda, Ramana, 2022. "House prices, home equity and entrepreneurship: Evidence from U.S. census micro data," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 103-119.
    2. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.
    3. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    4. Vladasel, Theodor & Lindquist, Matthew J. & Sol, Joeri & van Praag, Mirjam, 2021. "On the origins of entrepreneurship: Evidence from sibling correlations," Journal of Business Venturing, Elsevier, vol. 36(5).
    5. Bracke, Philippe & Hilber, Christian A.L. & Silva, Olmo, 2018. "Mortgage debt and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 103(C), pages 52-66.
    6. David Blanchflower, 2009. "Minority self-employment in the United States and the impact of affirmative action programs," Annals of Finance, Springer, vol. 5(3), pages 361-396, June.
    7. Popov, Alexander & Corradin, Stefano, 2013. "House prices, home equity and entrepreneurships," Working Paper Series 1544, European Central Bank.
    8. Casey J. Frid & David M. Wyman & Bentley Coffey, 2016. "Effects of wealth inequality on entrepreneurship," Small Business Economics, Springer, vol. 47(4), pages 895-920, December.
    9. Silvia Magri, 2009. "The financing of small entrepreneurs in Italy," Annals of Finance, Springer, vol. 5(3), pages 397-419, June.
    10. Sari Pekkala Kerr & William R. Kerr & Tina Xu, 2017. "Personality Traits of Entrepreneurs: A Review of Recent Literature," NBER Working Papers 24097, National Bureau of Economic Research, Inc.
    11. Takanori Adachi & Takanori Hisada, 2017. "Gender differences in entrepreneurship and intrapreneurship: an empirical analysis," Small Business Economics, Springer, vol. 48(3), pages 447-486, March.
    12. Kapinos, Pavel & Gurley-Calvez, Tami & Kapinos, Kandice, 2016. "(Un)expected housing price changes: Identifying the drivers of small business finance," Journal of Economics and Business, Elsevier, vol. 84(C), pages 79-94.
    13. Philippe Bracke & Christian Hilber & Olmo Silva, 2014. "Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment," CESifo Working Paper Series 5048, CESifo.
    14. Rafael P. Ribas, 2014. "Liquidity Constraints, Informal Financing, and Entrepreneurship: Direct and Indirect Effects of a Cash Transfer Programme," Working Papers 131, International Policy Centre for Inclusive Growth.
    15. Pierre Azoulay & Benjamin F. Jones & J. Daniel Kim & Javier Miranda, 2020. "Age and High-Growth Entrepreneurship," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 65-82, March.
    16. Robert W. Fairlie & Javier Miranda, 2017. "Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 3-34, February.
    17. Eric W. Bond & James Tybout & Hale Utar, 2015. "Credit Rationing, Risk Aversion, And Industrial Evolution In Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 695-722, August.
    18. Robert W. Fairlie, 2013. "Entrepreneurship, Economic Conditions, and the Great Recession," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 207-231, June.
    19. Robert W. Fairlie, 2013. "Minority and immigrant entrepreneurs: access to financial capital," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 8, pages 153-175, Edward Elgar Publishing.
    20. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Centre for Economic Performance, LSE.

    More about this item

    Keywords

    Self-employment; small business; entrepreneurship; startup investment; occupational choice; financing.;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:22-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dawn Anderson (email available below). General contact details of provider: https://edirc.repec.org/data/cesgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.