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The best and the brightest or the least successful? Self-employment entry among male wage-earners in Sweden

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Abstract

This paper analyzes self-employment entry among Swedish-born male wage-earners. Is it the best and the brightest or the least successful that become self-employed? The residual from an income regression is used as an indicator of who belongs to which group. We find that both wage-earners who receive a lower income than predicted, i.e. have a negative residual, and those who receive a higher income than predicted, i.e. have a positive residual, are more likely to become self-employed than those who receive an income close to the predicted one. However, splitting self-employment into different types depending on corporate form and number of employees, we find that the self-employed are drawn from both tails of the residual distribution only if it is a matter of unincorporated firms. Wage-earners who become self-employed and start an incorporated firm are only drawn from the top of the residual distribution. Using self-employment income and turnover as measures of self-employment performance, we find a positive linear relationship between the income residual and performance.

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Notes

  1. See Blanchflower (2004) and Parker (2009) for surveys of earlier research.

  2. Amit et al. (1993) identify these four factors as interesting and relevant regarding the decision to become self-employed. See also Parker (2009) for a summary of the research on psychological factors.

  3. See Gielen and Van Ours (2007) for an overview of this research.

  4. See Carree and Thurik (2003) for an extensive survey of the impact of entrepreneurship on growth.

  5. The results from the income regression are not presented here but are available from the authors upon request.

  6. For a description of the definitional problems of this group, see Sect. 3.2.

  7. The regressions have been estimated without controls and with a smaller set of controls. Although the size of the estimates changes slightly the main results are not affected.

  8. 2001 is chosen as the starting year since this is the first year for which we have information on occupation.

  9. In 2006, the lowest income in a collective agreement for workers organized by LO (the blue-collar union) was 13,600 SEK (LO-tidningen 2006).

  10. The results for estimations with the ten decile groups are available from the authors upon request.

  11. This is the variable provided by Statistics Sweden; no other measure of the incomes for the self-employed is available.

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Acknowledgments

We want to thank two anonymous referees, seminar participants and Åsa Rosén for comments on earlier versions of this paper.

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Authors and Affiliations

  1. Swedish Institute for Social Research, Stockholm University, Stockholm, Sweden

    Pernilla Andersson Joona & Eskil Wadensjö

  2. SULCIS, Stockholm University, Stockholm, Sweden

    Pernilla Andersson Joona & Eskil Wadensjö

  3. IZA, Bonn, Germany

    Eskil Wadensjö

Authors
  1. Pernilla Andersson Joona
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  2. Eskil Wadensjö
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Correspondence to Pernilla Andersson Joona.

Appendix

Appendix

See Tables 9, 10, 11, 12, 13, 14, and 15.

Table 9 Sample means 2001
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Table 10 Five most common occupations in 2001 among those who stayed employed at the same firm
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Table 11 Five most common occupations in 2001 among those who became self-employed
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Table 12 Five most common industries in 2001 among those who stayed employed at the same firm
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Table 13 Five most common industries in 2001 among those who became self-employed
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Table 14 Correlation between the deciles of the residual distribution and the deciles income distribution
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Table 15 Probability of leaving the current firm. Multinomial logit estimation based on transitions between 2001 and 2005
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Andersson Joona, P., Wadensjö, E. The best and the brightest or the least successful? Self-employment entry among male wage-earners in Sweden. Small Bus Econ 40, 155–172 (2013). https://doi.org/10.1007/s11187-011-9365-0

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