Becoming an Entrepreneur

27 Pages Posted: 21 Apr 2007

See all articles by Hugo Ñopo

Hugo Ñopo

Inter-American Development Bank (IDB); IZA Institute of Labor Economics

Patricio Valenzuela

University of Chile

Multiple version iconThere are 2 versions of this paper

Date Written: March 2007

Abstract

Using the 1996-2001 Chilean CASEN Panel Survey, this paper analyzes the impact on income of the switch from salaried employment to entrepreneurship (self-employment and leadership of micro-enterprises). By means of a difference-in-differences non-parametric matching estimator the paper alleviates problems of selection bias (on observable and unobservable traits) and creates the appropriate counterfactuals of interest. The results indicate that the income gains associated with the switch from salaried employment to entrepreneurship are positive, statistically significant and financially substantial. Even more, the results are qualitatively the same using mean and medians, suggesting that the impacts are not influenced by the presence of few superstar winners. Additionally, the income changes associated with the reverse switches (from self-employment to salaried jobs) are negative. The results also suggest interesting gender differences, as females show higher gains than males on the switch from salaried jobs to entrepreneurship and lower losses on the reverse switch.

Keywords: difference-in-differences, non-parametric matching, micro-enterprises

JEL Classification: J16, J31, J41

Suggested Citation

Nopo, Hugo and Valenzuela, Patricio, Becoming an Entrepreneur (March 2007). IZA Discussion Paper No. 2716. Available at SSRN: https://ssrn.com/abstract=981702

Hugo Nopo (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Patricio Valenzuela

University of Chile ( email )

Republica 701 Santiago
Chile

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