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
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: Suggested Citation
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