The Labour Market Consequences of Self-Employment Spells: European Evidence

Posted: 31 Mar 2008

See all articles by Ari Hyytinen

Ari Hyytinen

University of Jyväskylä

Petri Rouvinen

VTT Technical Research Centre of Finland Ltd

Multiple version iconThere are 2 versions of this paper

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: Self-employment, Job mobility, Earnings, Wage differentials, Selection

JEL Classification: J23, J24, J31

Suggested Citation

Hyytinen, Ari and Rouvinen, Petri, The Labour Market Consequences of Self-Employment Spells: European Evidence. Labour Economics, Vol. 15, No. 2, 2008, Available at SSRN: https://ssrn.com/abstract=1114061

Ari Hyytinen

University of Jyväskylä ( email )

PO Box 35
Jyväskylä, 40014
Finland

HOME PAGE: http://www.jyu.fi

Petri Rouvinen (Contact Author)

VTT Technical Research Centre of Finland Ltd ( email )

FIN-02044 VTT
Finland

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