@article{9643779d67a64692b620d609bf675f1b,
title = "The labour market consequences of self-employment spells: European evidence",
abstract = "We examine how those re-entering paid-employment after a brief self-employment spell fare upon return using data from the European Community Household Panel. Unconditionally, those re-entering paid-employment appear to have considerably lower wages than those staying in the wage sector. This difference appears to be larger in Europe than in the US. Conditional analysis suggests, however, that the difference is more apparent than real: It seems that Europeans select negatively into (and possibly out-of) self-employment, i.e., the likelihood of entering (and exiting) entrepreneurship correlates negatively with unobserved ability and/or in-paid-employment productivity. Our analysis of non-wage outcomes indicates that the selection is mostly involuntary, and that for highly educated men, the brief self-employment spells are unemployment in disguise.",
keywords = "Earnings, Job mobility, Selection, Self-employment, Wage differentials",
author = "Ari Hyytinen and Petri Rouvinen",
note = "Funding Information: Hundreds of thousands of Europeans enter self-employment each year, but self-employment spells are typically brief. Many of the new entrepreneurs therefore exit soon after entry. How do those who return to paid-employment fare in the labour market? Many European policy-makers appear to know the answer: those leaving self- for paid-employment after an entrepreneurial spell are not given a proper second chance. This paper investigates whether this perception of the consequences of the short self-employment spells is supported by the European Community Household Panel (ECHP), which allows us to track flows from paid-employment to self-employment and unemployment as well as the subsequent returns back to the wage sector. Funding Information: ACKNOWLEDGEMENTS: We thank Jaakko Pehkonen, the editor, and two anonymous referees for useful comments. Financial support from Tekes, the National Technology Agency of Finland, is gratefully acknowledged. Rouvinen's work for this paper is partly conducted in the context of the 2004–5 European Forum lead by Rikard Stankiewicz and Aldo Geuna of the Robert Schuman Centre for Advanced Studies at the European University Institute. Rouvinen gratefully acknowledges support of the Academy of Finland and the Yrj{\"o} Jahnsson Foundation. A prior version has been published as EUI Working Paper No. 2006/08. The views expressed are those of the authors and do not necessarily reflect the views of the Bank of Finland or ETLA. ",
year = "2008",
month = apr,
doi = "10.1016/j.labeco.2007.02.001",
language = "English",
volume = "15",
pages = "246--271",
journal = "Labour Economics",
issn = "0927-5371",
publisher = "Elsevier",
number = "2",
}
