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The Impact on Earnings When Entering Self-Employment: Evidence for Germany

  • Johannes Martin

Using data of the German Socio-Economic Panel (GSOEP) earnings differentials between self-employed and wage-employed workers in the German labor market are explored. Previous research based on US data reports lower incomes for entrepreneurs. In contrast to that, the findings of this contribution suggest the opposite for German entrepreneurs. They have considerably higher earnings than wage-employed workers. Furthermore, there is a significant and positive effect on earnings when entering self-employment. This holds true when it is also taken into account that workers usually report a smaller firm size and work longer after beginning an entrepreneurial occupation.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.415686.de/diw_sp0537.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 537.

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Length: 36 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp537
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  1. Roy Thurik & Isabel Grilo, 2005. "Latent and actual entrepreneurship in Europe and the US: some recent developments," Papers on Entrepreneurship, Growth and Public Policy 2005-24, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  2. Jörn Block & Philipp Sandner & Marcus Wagner & Marc Weiglein, 2009. "Unternehmensgründungen von Ausländern in Deutschland: Einkommenseffekte und Implikationen für die Gründungslehre," SOEPpapers on Multidisciplinary Panel Data Research 196, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2011. "Personality Characteristics and the Decision to Become and Stay Self-Employed," Discussion Papers of DIW Berlin 1113, DIW Berlin, German Institute for Economic Research.
  4. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  5. Philipp Köllinger & Maria Minniti & Christian Schade, 2005. ""I Think I Can, I Think I Can": Overconfidence and Entrepreneurial Behavior," Discussion Papers of DIW Berlin 501, DIW Berlin, German Institute for Economic Research.
  6. Mats Hammarstedt, 2009. "Predicted earnings and the propensity for self-employment: Evidence from Sweden," International Journal of Manpower, Emerald Group Publishing, vol. 30(4), pages 349-359, July.
  7. Heiko Bergmann & Rolf Sternberg, 2007. "The Changing Face of Entrepreneurship in Germany," Small Business Economics, Springer, vol. 28(2), pages 205-221, March.
  8. Daiji Kawaguchi, 2002. "Compensating Wage Differentials among Self-Employed Workers:Evidence from Job Satisfaction Scores," ISER Discussion Paper 0568, Institute of Social and Economic Research, Osaka University.
  9. Williams, Donald R., 2002. "Returns to education and experience in self-employment: Evidence from Germany," IRISS Working Paper Series 2002-04, IRISS at CEPS/INSTEAD.
  10. Block, Joern & Wagner, Marcus, 2006. "Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials," MPRA Paper 610, University Library of Munich, Germany.
  11. Edvard Johansson, 2000. "Self-employment and the predicted earnings differential - evidence from Finland," Finnish Economic Papers, Finnish Economic Association, vol. 13(1), pages 45-55, Spring.
  12. Jensen & Shore, 2008. "Changes in the Distribution of Income Volatility," 2008 Meeting Papers 82, Society for Economic Dynamics.
  13. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  14. Shane T. Jensen & Stephen H. Shore, 2008. "Changes in the Distribution of Income Volatility," Papers 0808.1090, arXiv.org.
  15. Bruno S. Frey & Matthias Benz, . "Being Independent is a Great Thing: Subjective Evaluations of Self-Employment and Hierarchy," IEW - Working Papers 135, Institute for Empirical Research in Economics - University of Zurich.
  16. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
  17. repec:cup:cbooks:9780521828130 is not listed on IDEAS
  18. Yannis Georgellis & Howard J. Wall, 2004. "Gender differences in self-employment," Working Papers 1999-008, Federal Reserve Bank of St. Louis.
  19. Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 275-96, May.
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