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Becoming an Entrepreneur

  • Nopo, Hugo

    ()

    (Inter-American Development Bank)

  • Valenzuela, Patricio

    ()

    (Inter-American Development Bank)

Using the 1996-2001 Chilean CASEN Panel Survey, this paper analyzes the impact on income of the switch from salaried employment to entrepreneurship (self-employment and leadership of micro-enterprises). By means of a difference-in-differences non-parametric matching estimator the paper alleviates problems of selection bias (on observable and unobservable traits) and creates the appropriate counterfactuals of interest. The results indicate that the income gains associated with the switch from salaried employment to entrepreneurship are positive, statistically significant and financially substantial. Even more, the results are qualitatively the same using mean and medians, suggesting that the impacts are not influenced by the presence of few “superstar winners.” Additionally, the income changes associated with the reverse switches (from self-employment to salaried jobs) are negative. The results also suggest interesting gender differences, as females show higher gains than males on the switch from salaried jobs to entrepreneurship and lower losses on the reverse switch.

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File URL: http://ftp.iza.org/dp2716.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2716.

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Length: 27 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2716
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  1. George J. Borjas & Stephen G. Bronars, 1988. "Consumer Discrimination and Self-Employment," NBER Working Papers 2627, National Bureau of Economic Research, Inc.
  2. Nopo, Hugo & Saavedra, Jaime & Torero, Maximo, 2004. "Ethnicity and Earnings in Urban Peru," IZA Discussion Papers 980, Institute for the Study of Labor (IZA).
  3. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  4. repec:idb:brikps:79506 is not listed on IDEAS
  5. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, vol. 97(2), pages 118-123, November.
  6. 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.
  7. Eduardo Engel & Alexander Galetovic & Claudio Raddatz, 1998. "Reforma tributaria y distribución del ingreso en Chile," Documentos de Trabajo 40, Centro de Economía Aplicada, Universidad de Chile.
  8. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
  9. Hugo Ñopo & Jaime Saavedra & Máximo Torero, 2007. "Ethnicity and Earnings in a Mixed-Race Labor Market," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 709-734.
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