Stars and Misfits: Self-Employment and Labor Market Frictions
39 Pages Posted: 25 Mar 2008 Last revised: 29 Oct 2015
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
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