Self-Employment Dynamics and the Returns to Entrepreneurship / Eleanor W. Dillon, Christopher T. Stanton.

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Dillon, Eleanor W

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23168.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Small business owners and others in self-employment have the option to transition to paid work. If there is initial uncertainty about entrepreneurial earnings, this option increases the expected lifetime value of self-employment relative to pay in a single year. This paper first documents that moves between paid work and self-employment are common and consistent with experimentation to learn about earnings. This pattern motivates estimating the expected returns to entrepreneurship within a dynamic lifecycle model that allows for non-random selection and gradual learning about the entrepreneurial earnings process. The model accurately fits entry patterns into self-employment by age. The option value of returning to paid work is found to constitute a substantial portion of the monetary value of entrepreneurship. The model is then used to evaluate policies that change incentives for entry into self-employment.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w23168 (Browse shelf(Opens below))	Not For Loan

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February 2017.

Small business owners and others in self-employment have the option to transition to paid work. If there is initial uncertainty about entrepreneurial earnings, this option increases the expected lifetime value of self-employment relative to pay in a single year. This paper first documents that moves between paid work and self-employment are common and consistent with experimentation to learn about earnings. This pattern motivates estimating the expected returns to entrepreneurship within a dynamic lifecycle model that allows for non-random selection and gradual learning about the entrepreneurial earnings process. The model accurately fits entry patterns into self-employment by age. The option value of returning to paid work is found to constitute a substantial portion of the monetary value of entrepreneurship. The model is then used to evaluate policies that change incentives for entry into self-employment.