An Empirical Study of the Transition from Paid Work to Self-Employment

Journal of Entrepreneurial Finance and Business Ventures, Vol. 10, No. 1, pp. 1-16, August 2005

25 Pages Posted: 31 Dec 2005

See all articles by S. Ramakrishna Velamuri

S. Ramakrishna Velamuri

CEIBS

S. Venkataraman

University of Virginia - Darden School of Business

Abstract

We explore the transition from paid work to self-employment using three explanatory variables: paid income, predicted income, and income for ability. We find no linear relationship between the three variables and the self-employment transition. We then test for curvilinear relationships. We find that individuals with low incomes are more likely to take up self-employment. Further, income for ability is the strongest predictor of the transition to self-employment. The relationship between ability and self-employment is U shaped: very low ability and very high ability individuals are more likely to take up self-employment.

Keywords: Self-employment, entrepreneurship, paid income, ability, human capital

JEL Classification: J23, J24, J31

Suggested Citation

Velamuri, S. Ramakrishna and Venkatarman, Sankaran, An Empirical Study of the Transition from Paid Work to Self-Employment. Journal of Entrepreneurial Finance and Business Ventures, Vol. 10, No. 1, pp. 1-16, August 2005, Available at SSRN: https://ssrn.com/abstract=871115

S. Ramakrishna Velamuri (Contact Author)

CEIBS ( email )

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Sankaran Venkatarman

University of Virginia - Darden School of Business ( email )

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