Is Self-employment Really a Bad Experience?: The Effects of Previous Self-employment on Subsequent Wage-employment Wages

Ulrich Kaiser, Nikolaj Malkow-Møller

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We use propensity score matching methods to quantify the effects of past self-employment experience on subsequent earnings in dependent employment using data on the population of Danish men observed between 1990 and 1996. Our results generally confirm existing studies in that we find that a spell of self-employment is associated with lower hourly wages compared to workers who were consecutively wage-employed. We also show, however, that this effect disappears—and even becomes positive in some settings—for formerly self-employed who find dependent employment in the same sector as their self-employment sector. Hence, the on average negative effect of self-employment is rather caused by sector switching than by the
self-employment experience per se. Moreover, formerly self-employed who either enjoyed a high income or hired at least one worker during their self-employment spell receive wages in subsequent dependent employment that are at least as high as for individuals who have been consecutively wage-employed.
We use propensity score matching methods to quantify the effects of past self-employment experience on subsequent earnings in dependent employment using data on the population of Danish men observed between 1990 and 1996. Our results generally confirm existing studies in that we find that a spell of self-employment is associated with lower hourly wages compared to workers who were consecutively wage-employed. We also show, however, that this effect disappears—and even becomes positive in some settings—for formerly self-employed who find dependent employment in the same sector as their self-employment sector. Hence, the on average negative effect of self-employment is rather caused by sector switching than by the
self-employment experience per se. Moreover, formerly self-employed who either enjoyed a high income or hired at least one worker during their self-employment spell receive wages in subsequent dependent employment that are at least as high as for individuals who have been consecutively wage-employed.
LanguageEnglish
JournalJournal of Business Venturing
Volume26
Issue number5
Pages572–588
ISSN0883-9026
DOIs
StatePublished - Sep 2011

Keywords

    Cite this

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    abstract = "We use propensity score matching methods to quantify the effects of past self-employment experience on subsequent earnings in dependent employment using data on the population of Danish men observed between 1990 and 1996. Our results generally confirm existing studies in that we find that a spell of self-employment is associated with lower hourly wages compared to workers who were consecutively wage-employed. We also show, however, that this effect disappears—and even becomes positive in some settings—for formerly self-employed who find dependent employment in the same sector as their self-employment sector. Hence, the on average negative effect of self-employment is rather caused by sector switching than by theself-employment experience per se. Moreover, formerly self-employed who either enjoyed a high income or hired at least one worker during their self-employment spell receive wages in subsequent dependent employment that are at least as high as for individuals who have been consecutively wage-employed.",
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    Is Self-employment Really a Bad Experience? The Effects of Previous Self-employment on Subsequent Wage-employment Wages. / Kaiser, Ulrich; Malkow-Møller, Nikolaj .

    In: Journal of Business Venturing, Vol. 26, No. 5, 09.2011, p. 572–588.

    Research output: Contribution to journalJournal articleResearchpeer-review

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