The Transformation of Self Employment

53 Pages Posted: 8 Feb 2022

See all articles by Innessa Colaiacovo

Innessa Colaiacovo

Harvard University - Business School (HBS)

Margaret Dalton

Center for Economic Inclusion

Sari Pekkala Kerr

Wellesley College

William Kerr

Harvard University - Entrepreneurial Management Unit

Date Written: January 28, 2022

Abstract

Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in “hometown” local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.

Suggested Citation

Colaiacovo, Innessa and Dalton, Margaret and Kerr, Sari Pekkala and Kerr, William R., The Transformation of Self Employment (January 28, 2022). Harvard Business School Entrepreneurial Management Working Paper No. 22-051, Available at SSRN: https://ssrn.com/abstract=4025605 or http://dx.doi.org/10.2139/ssrn.4025605

Innessa Colaiacovo

Harvard University - Business School (HBS)

Boston, MA 02163
United States

Margaret Dalton

Center for Economic Inclusion ( email )

St. Paul, MN
United States

Sari Pekkala Kerr

Wellesley College ( email )

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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