Research
Necessity Versus Opportunity Entrepreneurship: Entry and Performance of Job-Losers and Moonlighters
Abstract: Prior literature classifies a necessity entrepreneur as an entrant who was previously unemployed and classifies all other entrants as opportunity entrepreneurs. This method results in misclassification of entrepreneurs, which leads to biased regression results and incorrectly conclusions. To address this concern, I analyze entry behavior of moonlighters and job-losers to understand their motive for being self-employed. Job-loss is associated with necessity entrepreneurship and moonlighting with opportunity entrepreneurship. I classify necessity and opportunity entrepreneurs accordingly. Necessity entrepreneurs employ fewer workers, they are less likely to incorporate their business, and they earn less than opportunity entrepreneurs. However, they replace a large portion of their pre-entry earnings and have similar firm survival to opportunity entrepreneurs. I conclude that subsidizing necessity entrepreneurship may not be justified from an efficiency viewpoint but may be useful as a policy tool to combat unemployment.
Abstract: Prior literature classifies a necessity entrepreneur as an entrant who was previously unemployed and classifies all other entrants as opportunity entrepreneurs. This method results in misclassification of entrepreneurs, which leads to biased regression results and incorrectly conclusions. To address this concern, I analyze entry behavior of moonlighters and job-losers to understand their motive for being self-employed. Job-loss is associated with necessity entrepreneurship and moonlighting with opportunity entrepreneurship. I classify necessity and opportunity entrepreneurs accordingly. Necessity entrepreneurs employ fewer workers, they are less likely to incorporate their business, and they earn less than opportunity entrepreneurs. However, they replace a large portion of their pre-entry earnings and have similar firm survival to opportunity entrepreneurs. I conclude that subsidizing necessity entrepreneurship may not be justified from an efficiency viewpoint but may be useful as a policy tool to combat unemployment.
Explaining the Male-Female Earnings Gap in Self-Employment
Abstract: While economics researchers have a good understanding of why the male-female earnings gap exists for employed workers, there is no clear explanation for the even larger earnings gap among self-employed men and women. Self-employed men earn $3,599 per month on average - almost twice that of self-employed women’s monthly earnings, $1,834. Some of this gap is due to self-employed men working 4 more hours per week on average. Small portions of the earnings gap can also be explained by differences in industry sorting and in business characteristics. Men are more likely to sort into higher earning industries, and male owned businesses are older and larger. Oaxaca-Blinder earnings decompositions yield unsatisfying results. Much of the earnings gap cannot be explained by differences in observables. This paper take a new approach to the issue by investigating the role of capital, the interaction between capital investment and labor hours, and the role of sorting into self-employment. A simple theoretical model implies a gender earnings gap will occur if (1) women’s disutility from labor is higher than men’s, (2) women value non-pecuniary benefits of self-employment more than men, (3) men receive more entrepreneurial mentorship, (4) women are more risk averse. I suppose these hypotheses with evidence from the Survey of Income and Program Participation (SIPP), and with evidence from prior literature.
Abstract: While economics researchers have a good understanding of why the male-female earnings gap exists for employed workers, there is no clear explanation for the even larger earnings gap among self-employed men and women. Self-employed men earn $3,599 per month on average - almost twice that of self-employed women’s monthly earnings, $1,834. Some of this gap is due to self-employed men working 4 more hours per week on average. Small portions of the earnings gap can also be explained by differences in industry sorting and in business characteristics. Men are more likely to sort into higher earning industries, and male owned businesses are older and larger. Oaxaca-Blinder earnings decompositions yield unsatisfying results. Much of the earnings gap cannot be explained by differences in observables. This paper take a new approach to the issue by investigating the role of capital, the interaction between capital investment and labor hours, and the role of sorting into self-employment. A simple theoretical model implies a gender earnings gap will occur if (1) women’s disutility from labor is higher than men’s, (2) women value non-pecuniary benefits of self-employment more than men, (3) men receive more entrepreneurial mentorship, (4) women are more risk averse. I suppose these hypotheses with evidence from the Survey of Income and Program Participation (SIPP), and with evidence from prior literature.