NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Self-Employment Dynamics and the Returns to Entrepreneurship

Eleanor W. Dillon, Christopher T. Stanton

NBER Working Paper No. 23168
Issued in February 2017
NBER Program(s):Asset Pricing, Corporate Finance, Labor Studies, Public Economics, Productivity, Innovation, and Entrepreneurship

Small business owners and others in self-employment have the option to transition to paid work. If there is initial uncertainty about entrepreneurial earnings, this option increases the expected lifetime value of self-employment relative to pay in a single year. This paper first documents that moves between paid work and self-employment are common and consistent with experimentation to learn about earnings. This pattern motivates estimating the expected returns to entrepreneurship within a dynamic lifecycle model that allows for non-random selection and gradual learning about the entrepreneurial earnings process. The model accurately fits entry patterns into self-employment by age. The option value of returning to paid work is found to constitute a substantial portion of the monetary value of entrepreneurship. The model is then used to evaluate policies that change incentives for entry into self-employment.

download in pdf format
   (683 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23168

Users who downloaded this paper also downloaded* these:
Jorion and Mishkin w3574 A Multi-Country Comparison of Term Structure Forecasts at Long Horizons
Shaw and Sørensen w23320 The Productivity Advantage of Serial Entrepreneurs
Angrist and Pischke w23144 Undergraduate Econometrics Instruction: Through Our Classes, Darkly
Autor, Dorn, and Hanson w23173 When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Young Men
Gompers and Calder-Wang w23082 Diversity in Innovation
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us