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

Format:

Book

Author/Creator:

Dillon, Eleanor W.

Contributor:

National Bureau of Economic Research.

Stanton, Christopher T.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23168.

NBER working paper series no. w23168

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

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.

Notes:

Print version record

February 2017.