Unpredictably Stable: An Investigation into the Stayer-Mover Tendencies among Self-employed

Does entrepreneurship lower the losses associated with labor market mismatching by lowering employment turnover? This paper examines whether a transition to self-employment induces a shift into an individual’s stayer-mover tendency. Using a propensity score-matching technique, the hypothesis is tested on matched employer-employee data from the entire Danish population. The analysis reveals that self-employed stay longer in their employment status compared to individuals in paid-employment. This effect is not explained by reduced attractiveness to the wage sector (lock-in effect). We interpret this finding by crafting a theory in which entrepreneurship may resolve mismatches of individuals in the labor market and may inherently increase the value of non-monetary benefits, namely independence. This counterintuitive finding – self-employment yields greater stability, all else equal – has fundamental implications for the understanding of the returns to entrepreneurship.