Do Employers Value Entrepreneurial Human Capital? An empirical study of post-self-employment wages EXECUTIVE SUMMARY Marlena I. Lee11 Introduction In 2003, 7.5% of the labor force or about 10.3 million workers were self-employed.2Many of these self-employed workers quickly return to paid employment. Evidence from Canada and Great Britain suggest that average gross flows into and out of self-employment involves over 40% of self-employed workers each year.34Given the transitory nature of self-employment, a better understanding of the nature of transitions between self-employment and wage employment is needed. This study attempt to provide evidence on one aspect of this broader topic: how are wages impacted by self-employment experience? The few previous studies that have also looked at how previous self-employment experience impacts wages have yielded inconclusive evidence. While one study has found that self-employment experience and wage experience are valued roughly the same in the US labor market, another study reports that entrepreneurs returning to paid employment earn a higher wage than employees with similar work experience, education 1I am grateful to Erik Hurst for many helpful discussions and am additionally thankful to Gene Fama, John Heaton, Amee Kamdar, and Toby Moskowitz for many useful comments. Research support from the Sanford J. Grossman Fellowship in Honor of Arnold Zellner and the Ewing Marion Kauffman Foundation is gratefully acknowledged. Any opinions expressed herein are the author's. 2Hipple, S., 2004, Self-employment in the United States: An update, Monthly Labor Review, 124(7), 13-23.3Lin, Z., G. Picot and J. Compton, 2000, The Entry and Exit Dynamics of Self-Employment in Canada, Journal Small Business Economics 15(2), 105-125. 4Taylor, M. P., 1999, Survival of the Fittest? An Analysis of Self-Employment Duration in Britain, The Economic Journal 109(454), 140-155.
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