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Stars and Misfits: Self-Employment and Labor Market Frictions

  • Thomas Astebro

    ()

    (HEC Paris)

  • Jing Chen

    ()

    (Department of Economics, Florida International University)

  • Peter Thompson

    ()

    (Department of Economics, Florida International University)

Recent evidence has shown that entrants into self-employment are disproportionately drawn from the tails of the earnings and ability distributions. This observation is explained by a multi-task model of occupational choice in which frictions in the labor market induces mismatches between firms and workers, and mis-assignment of workers to tasks. The model also yields distinctive predictions relating prior work histories to earnings and to the probability of entry into self-employment. These predictions are tested with the Korean Labor and Income Panel Study, from which we find considerable support for the model.

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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1003.

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Length: 37 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:fiu:wpaper:1003
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