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How former business owners fare in the labor market? Job assignment and earnings

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  • Baptista, Rui
  • Lima, Francisco
  • Preto, Miguel Torres

Abstract

This study uses detailed longitudinal matched employer–employee data to examine the impact of entrepreneurial experience on job assignments, careers, and wages. The results suggest that there are significant differences in career mobility between former business owners and workers who were always wage employees. Former business owners enter firms at higher job levels and progress faster up the hierarchy than wage employees without entrepreneurial experience. The majority of the former business owners find jobs in small firms. The return to business ownership experience is lower than the return to wage employee experience, thus suggesting that the labor market imposes a penalty for business ownership experience.

Suggested Citation

  • Baptista, Rui & Lima, Francisco & Preto, Miguel Torres, 2012. "How former business owners fare in the labor market? Job assignment and earnings," European Economic Review, Elsevier, vol. 56(2), pages 263-276.
    • Handle: RePEc:eee:eecrev:v:56:y:2012:i:2:p:263-276
    DOI: 10.1016/j.euroecorev.2011.08.004
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    More about this item

    Keywords

    Entrepreneurship; Business owner experience; Internal labor markets; Task-specific human capital; Matched employer–employee data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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