Stars and Misfits: Self-Employment and Labor Market Frictions

Astebro, Thomas B.; Chen, Jing; Thompson, Peter

doi:10.2139/ssrn.1113048

Stars and Misfits: Self-Employment and Labor Market Frictions

39 Pages Posted: 25 Mar 2008 Last revised: 29 Oct 2015

See all articles by Thomas B. Astebro

Thomas B. Astebro

HEC Paris - Economics and Decision Sciences

Jing Chen

Florida International University (FIU) - Department of Economics

Peter Thompson

Georgia Institute of Technology - Scheller College of Business

Date Written: March 1, 2008

Abstract

Recent evidence has shown that entrants into self-employment are disproportionately drawn from the tails of the earnings and ability distributions. This observation is explained by a multi-task model of occupational choice in which frictions in the labor market induces mismatches between firms and workers, and mis-assignment of workers to tasks. The model also yields distinctive predictions relating prior work histories to earnings and to the probability of entry into self-employment. These predictions are tested with the Korean Labor and Income Panel Study, from which we find considerable support for the model.

Keywords: entrepreneurship, self-employment, jack-of-all-trades, skill complementarity

JEL Classification: J24, L26

Suggested Citation: Suggested Citation

Astebro, Thomas B. and Chen, Jing and Thompson, Peter, Stars and Misfits: Self-Employment and Labor Market Frictions (March 1, 2008). Available at SSRN: https://ssrn.com/abstract=1113048 or http://dx.doi.org/10.2139/ssrn.1113048