The labour market consequences of self-employment spells: European evidence

Ari Hyytinen, Petri Rouvinen (Corresponding Author)

Research output: Contribution to journalArticleScientificpeer-review

50 Citations (Scopus)


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.

Original languageEnglish
Pages (from-to)246-271
Number of pages26
JournalLabour Economics
Issue number2
Publication statusPublished - Apr 2008
MoE publication typeA1 Journal article-refereed


  • Earnings
  • Job mobility
  • Selection
  • Self-employment
  • Wage differentials


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