Labor market institutions,firm-specific skills,and trade patterns

This paper studies how a country's labor market institutions, by affecting workers' skill acquisition, can shape its export patterns. I develop an open-economy model in which workers undertake non-contractible activities to acquire firm-specific skills on the job. In the model, labor market protection raises workers' incentives to acquire firm-specific skills relative to general skills, turning labor laws into a source of comparative advantage. In particular, the model shows that countries with more protective labor laws export relatively more in firm-specific skill-intensive sectors at both the intensive and extensive margins. To test the theoretical predictions, I construct sector proxies for the firm-specific and industry-specific skill intensity by estimating returns to firm tenure and industry tenure for different U.S. manufacturing sectors during the 1974–1993 period. By estimating sector-level gravity equations for 84 countries using the Helpman–Melitz–Rubinstein (2008) framework, I find evidence supporting the predicted effects of labor market institutions at both margins of exports.     

Labour market characteristics and surviving import shocks

This paper investigates whether different labour market characteristics amplify or dampen the local labour market impacts from Chinese import competition exposure. I exploit state‐level variation in initial, pre‐shock labour market characteristics and regional variation across local labour markets in exposure to Chinese imports for identification. I find that local labour markets in states with higher union density experience more severe adverse consequences as a result of increased import exposure. Conversely, higher initial minimum wages help mute the negative impacts of the China shock. I also provide some evidence that exceptions to employment‐at‐will legislation can affect employment responses to increased Chinese imports. Finally, examining all policies together in an index, I show that higher levels of policies intended to benefit and protect workers can actually magnify the extent of the damage inflicted by import competition. My results suggest that initial labour market characteristics and policies can play an important role in understanding why local labour markets react differently to trade shocks.     

Labour market reforms in a globalised world

In the traditional model of international trade, labour market reforms in one country are often viewed as beggar-thy-neighbour policies, because they negatively affect the competitiveness and employment levels of the country’s trading partners. Empirical evidence, however, suggests that this is not the case. By addressing labour market reforms in the context of intra-industry trade, this article explains how such reforms, while boosting employment, ultimately reduce a country’s terms of trade, thereby benefitting the country’s trading partners. The authors call for more international policy coordination to achieve optimal outcomes.     

Reciprocity and informal institutions in international market entry

This article first identifies two gaps in the literature: (1) the need to expand international market entry research beyond contractual modes of “make, buy, and ally;” and (2) the need to address the imbalance in the institution-based view that has paid inadequate attention to informal institutions. To help close the two gaps, we identify reciprocity—the mutually contingent exchange of gratifications that is supported by informal institutions—to be a non-contractual mode of international market entry. We focus on how informal institutions provide some of the conditions, motivations, and precipitating circumstances behind the use of reciprocity.     

Female self-employment and children

Several analyses report a positive correlation between fertility and female self-employment; however, scholars disagree about the direction of this relationship. Knowing about the causal relationship is important because the relevant mechanisms and possible implications differ tremendously. This paper studies two competing hypotheses: Is self-employment more attractive to women because they have children? Or, is it occupation-specific characteristics of self-employed women that impact their fertility? This work applies a unique approach by utilizing exogenous variation in both children and self-employment.     

Unemployment and relative labor market institutions between trading partners

This paper contributes to the literature that highlights the role of trading partners' institutions for a country's unemployment rate. The objective is to study whether the results established in the minimum wage-setting of Davis (1998) hold when unemployment is driven by search frictions. This paper finds that relative labor market institutions matter for equilibrium unemployment as they generate comparative advantages, but there are two main differences with Davis. With North-North trade, unemployment decreases in the low-regulation country. When South is brought into the picture, low-regulation North is not insulated, and unemployment increases in both developed countries as a result of specialization.     

Labour market policies in the western industrialised countries

The longer the high levels of unemployment continue in western countries the greater is the discussion about a policy aimed at reducing unemployment which is independent of general counter-cyclical and growth policies. What type of labour market policy measures have been adopted up to now in these countries?

     

Public health insurance,individual health,and entry into self-employment

We investigate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into self-employment. Health insurance systems that distinguish between the two sectors of employment create incentives or disincentives to start a business for different individuals. We estimate a discrete time hazard rate model of entry into self-employment based on representative household panel data for Germany, which include individual health information. The results indicate that an increase in the health insurance cost differential between self-employed workers and paid employees by €10 per month decreases the probability of entry into self-employment by 1.7% of the annual entry rate. This shows that entrepreneurship lock, which an emerging literature describes for the system of employer-provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health-care reforms.     

Gender,borrowing patterns and self-employment: some evidence for England

The purpose of this paper is twofold. First, we try to identify whether women have different borrowing patterns from men when trying to get into self-employment along with the factors that explain these different propensities. Second, we try to quantify the impact of these differences in borrowing propensity on women’s willingness to become self-employed. The empirical analysis is carried out on a sample of individuals drawn from the English Household Survey of Entrepreneurship, 2003. Our results show that (1) women are less likely than men to seek external finance and that (2) gender differences in access to finance are affecting adversely the transition into self-employment.     

Franchising and the choice of self-employment

This paper reports the findings of a study of the decision to purchase a franchise within the broader context of the decision to become self-employed. The sample is taken from individuals who had indicated an interest in self-employment and franchising three years prior to the current study. In the interim, some had purchased franchises, some had opened or bought independent businesses, and some had remained employed by others. The differences among these groups are examined. Some support was found for the posited relationship between the personal benefits of self-employment and the decision to purchase a franchise or independent business. The importance attached to the financial and business benefits of franchising is positively related to the decision to purchase a franchise. Finally, there was some evidence that franchising offered greater choice of sectors. Franchisees were less likely than independent business owners to operate within sectors where they had previous experience.     

Individual and place-based drivers of self-employment in Chile

This paper analyzes the importance of individual and place characteristics on the selection into self-employment in Chile. Following a structural and multilevel empirical approach, we test whether both sets of variables explain the variation of individual wages, self-employed earnings, and the propensity of being in independent work. The results indicate that while most of the variation in these three outcomes is explained by individuals’ traits, place-related variables account for a non-negligible share of spatial variation. Second, as suggested by occupational choice theories, the propensity of being in self-employment positively correlates with larger expected earning differentials, but only in the case of employers. This, along with other results, suggests that while employers seem to choose their occupational status, own accounts in Chile seem to respond to factors pushing them into self-employment.     

Life satisfaction and self-employment: a matching approach

Despite lower incomes, the self-employed consistently report higher satisfaction with their jobs. But are self-employed individuals also happier, more satisfied with their lives as a whole? High job satisfaction might cause them to neglect other important domains of life, such that the fulfilling job crowds out other pleasures, leaving the individual on the whole not happier than others. Moreover, self-employment is often chosen to escape unemployment, not for the associated autonomy that seems to account for the high job satisfaction. We apply matching estimators that allow us to better take into account the above-mentioned considerations and construct an appropriate control group (in terms of balanced covariates). Using the BHPS dataset that comprises a large nationally representative sample of the British populace, we find that individuals who move from regular employment into self-employment experience an increase in life satisfaction (up to 2 years later), while individuals moving from unemployment to self-employment are not more satisfied than their counterparts moving from unemployment to regular employment. We argue that these groups correspond to “opportunity” and “necessity” entrepreneurship, respectively. These findings are robust with regard to different measures of subjective well-being as well as choice of matching variables, and also robustness exercises involving “simulated confounders”.     

Planning for self-employment at the beginning of a market economy: Evidence from individual data of East German workers

We investigate the plans of individual workers concerning future self-employment in the former German Democratic Republic shortly before the economic, monetary and social union in June/July 1990. Our data base is the Socio-Economic Panel East. We find that the desire to become an entrepreneur is basically determined by individual and household characteristics, including income and asset indicators, and not as much by the current job situation of the individual. The work experience attained in the socialist economy seems to be irrelevant for the decision to become self-employed in a market economy. Furthermore, we find evidence of barriers to entry which may come from capital market constraints and institutional restrictions. We also present an estimation of the determinants of the probability of being self-employed in Summer 1990. Due to institutional restrictions we find only a few individual characteristics to be important.For estimation, we use the binary and the ordinal logit model. The corresponding stochastic assumptions are tested extensively using pseudo-Lagrange multiplier tests against omitted variables, non-linearity, asymmetry of distribution, and heteroscedasticity.     

Tax progressivity and self-employment: evidence from Canadian provinces

We examine the effects of personal income tax progressivity—in the sense of rising marginal income tax rate—on self-employment. The impacts of income tax progressivity on self-employment depend on the relative effects of taxing success and the presence of tax evasion opportunities. Empirical estimates using Canadian provincial data for the period 1979–2006 indicate that there is a negative association between income tax progressivity and self-employment. This suggests that the adverse impact of income tax on entrepreneurial risk-taking outweighs the tax evasion opportunities for the self-employed. An important implication of our results is that a reduction in income tax progressivity encourages self-employment. The empirical estimates are robust to the various sensitivity checks.     

Pro-market institutions and outward FDI of emerging market firms: An institutional arbitrage logic

We offer new theory and evidence regarding the effects of pro-market institutions on outward foreign direct investment (FDI) of emerging market firms (EMFs). Drawing on the logic of institutional arbitrage, we integrate the escapism and exploitation mechanisms of EMF internationalization into a unified theoretical context. We propose an inverted U-shaped relationship between host market-supporting institutions (MSI) and the investment scale of an EMF’s FDI project in the country, showing an escape-driven upward slope for low-to-medium MSI levels and an exploitation-driven downward slope for medium-to-high MSI levels. We supplement this main argument with two boundary conditions: the alleviating effect of home market liberalization (HML) and the strengthening effect of home government subsidies (HGS), demonstrating the coexistence and variation of pro- and anti- market institutions in an emerging market. Using information on 1,450 FDI projects conducted by 288 Chinese listed firms in 116 host countries, we obtain supportive evidence for the predicted relationships between the three institutional forces. This study enriches the literatures on institutional arbitrage and pro-market institutions with evidence from EMFs.     

Gender and field of study as determinants of self-employment

This article concentrates on gender differences among university graduates with respect to self-employment. We investigate the characteristics of self-employed men and women, focusing in particular on the contribution of field of study as a determinant of the gender gap in self-employment rates. Our approach is based on probit regressions and on the application of a non-linear decomposition technique to the gender gap in self-employment. We find that age and field of study account for two-thirds of the observed gender gap in self-employment.     

Residential segregation influences on the likelihood of black and white self-employment

This paper estimates a model of potential to enter self-employment based on individual, household and community-level factors. This paper focuses on the impact of segregation on the likelihood of black and white working-age adults to be self-employed workers rather than wage or salary workers. A multi-level analysis combined answers of over 400,000 respondents to the 1990 and 2000 Integrated Public Use Micro Sample (IPUMS) [Ruggles, S., Sobek, M., Alexander, T., Fitch, C., Goeken, R., Hall, P., King, M., Ronnander, C., 2004. Integrated Public Use Microdata Series: Version 3.0 [Machine-readable database]. Minnesota Population Center [producer and distributor], Minneapolis, MN] with structural measures from 327 metropolitan areas from the U.S. Census Bureau's Housing Patterns files [Iceland, J., Weinberg, D., Steinmetz, E., 2002. Racial and ethnic residential segregation in the United States, 1980–2000. Special Report Series, CENSR no.3, U.S. Census Bureau, Washington, DC] to test the influence of each segregation process. The two residential segregation processes (relative clustering and exposure) were found to limit and enhance potential entry into self-employment, but in unique ways for each group.     

Entrepreneurship,economic development and institutions

This paper is an introduction to the special issue from the 3rd Global Entrepreneurship Monitor Research Conference held in Washington, D.C., in 2008. The paper has three objectives. First, to discuss the importance of the three stages of economic development, the factor-driven stage, the efficiency-driven stage and the innovation-driven stage. Second, to examine the empirical evidence on the relationship between stages of economic development and entrepreneurship. Third, to present a summary of the papers in the context of the theory.