Selection into Entrepreneurship and Self-Employment
    Working Paper 25350
  
        
    DOI 10.3386/w25350
  
        
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          We study the effects of ability and liquidity constraints on entrepreneurship. We develop a three sector Roy model that differentiates between entrepreneurs and other self-employed to address puzzling gaps that have emerged between theory and evidence on entry into entrepreneurship. The model predicts—and the data confirm—that entrepreneurs are positively selected on highly-remunerated human capital, but other self-employed are negatively selected on those same abilities; entrepreneurs are positively selected on collateral, but other self-employed are not; and entrepreneurship is procyclical, but self-employment is countercyclical.
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      Copy CitationRoss Levine and Yona Rubinstein, "Selection into Entrepreneurship and Self-Employment," NBER Working Paper 25350 (2018), https://doi.org/10.3386/w25350.
 
     
    