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Stars and Misfits: Self-Employment and Labor Market Frictions

Author

Listed:
  • Thomas B. Astebro

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Jing Chen

    (Copenhagen Business School - CBS - Copenhagen Business School [Copenhagen])

  • Peter Thompson

    (Department of Economics - FIU - Florida International University [Miami])

Abstract

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 multitask model of occupational choice in which frictions in the labor market induce mismatches between firms and workers, and misassignment 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.

Suggested Citation

  • Thomas B. Astebro & Jing Chen & Peter Thompson, 2011. "Stars and Misfits: Self-Employment and Labor Market Frictions," Post-Print hal-00647945, HAL.
    • Handle: RePEc:hal:journl:hal-00647945
    DOI: 10.1287/mnsc.1110.1400
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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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