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Does education matter for the earnings of former entrepreneurs? Longitudinal evidence using entry and exit dynamics

Author

Listed:
  • Emma Lappi

    (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School
    Swedish Entrepreneurship Forum
    Department of Strategy and Innovation, Copenhagen Business School)

  • Johan E. Eklund

    (Swedish Entrepreneurship Forum
    Blekinge Institute of Technology)

  • Johan Klaesson

    (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School
    Research Institute of Industrial Economics (IFN))

Abstract

Wage employment is the most commonly observed type of employment after a spell of entrepreneurship. The purpose of this paper is to investigate the effects of having been an entrepreneur on earnings after individuals exit. The question is how the entrepreneurship spell influences their value in the labor market? Based on a theoretical framework and earlier literature, our specific interest lies in how these outcomes interact with education level and the nature of the entrepreneurial venture. To investigate this question, we use longitudinal register data on firms and individuals in Sweden. The empirical strategy builds on matching techniques and estimations of earnings equations in a difference-in-differences framework with heterogenous treatment years. We provide evidence that there exists an earnings penalty when highly educated entrepreneurs return to wage employment. This effect is persistent throughout the time period that we observe. For individuals with lower educational attainment, we find no or weak evidence of a wage penalty. Our results suggest that the wage penalty for highly educated individuals operates through the depreciation of specific specialized skills valuable in wage employment.

Suggested Citation

  • Emma Lappi & Johan E. Eklund & Johan Klaesson, 2022. "Does education matter for the earnings of former entrepreneurs? Longitudinal evidence using entry and exit dynamics," Journal of Evolutionary Economics, Springer, vol. 32(3), pages 827-865, July.
    • Handle: RePEc:spr:joevec:v:32:y:2022:i:3:d:10.1007_s00191-022-00770-x
    DOI: 10.1007/s00191-022-00770-x
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    Cited by:

    1. Emma Lappi, 2023. "Help from the past—coworker ties and entry wages after self-employment," Small Business Economics, Springer, vol. 60(3), pages 1171-1196, March.
    2. Braunerhjelm, Pontus & Lappi, Emma, 2023. "Employees' entrepreneurial human capital and firm performance," Research Policy, Elsevier, vol. 52(2).
    3. Sundriyal, Vivek Kumar & Gabrielsson, Jonas, 2024. "The employment consequences of founding an incorporated business among STEM founders: Evidence from Swedish microdata," Technovation, Elsevier, vol. 133(C).
    4. Emma Lappi, 2024. "New hires, adjustment costs, and knowledge transfer—evidence from the mobility of entrepreneurs and skills on firm productivity," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 712-737.

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    More about this item

    Keywords

    Earnings; Entrepreneurship exit; Education; Labor Mobility;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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