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The Transformation of Self Employment

Author

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  • Innessa Colaiacovo
  • Margaret G. Dalton
  • Sari Pekkala Kerr
  • William R. Kerr

Abstract

Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.

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  • Innessa Colaiacovo & Margaret G. Dalton & Sari Pekkala Kerr & William R. Kerr, 2022. "The Transformation of Self Employment," NBER Working Papers 29725, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29725
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    References listed on IDEAS

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    1. Christel Gilles & Alain Trannoy & Antoine Baéna & Léa Flamand & Manal Tannani, 2022. "Quelles performances des entreprises créées par les séniors ?," Working Papers hal-04001005, HAL.
    2. Surbhi Kesar & Snehashish Bhattacharya & Lopamudra Banerjee, 2022. "Contradictions and Crisis in the World of Work: Informality, Precarity and the Pandemic," Development and Change, International Institute of Social Studies, vol. 53(6), pages 1254-1282, November.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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