Labour market institutions,learning and self-employment |
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Authors: | Nikolaj Malchow-Møller James R Markusen Jan R Skaksen |
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Institution: | (1) CEBR, Copenhagen Business School, Frederiksberg, Denmark;(2) Department of Business and Economics, University of Southern Denmark, Odense M, Denmark;(3) University of Colorado, Boulder, Colorado;(4) Department of Economics, Copenhagen Business School, Frederiksberg, Denmark |
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Abstract: | We develop a dynamic partial-equilibrium model to analyse how labour market institutions (wage compression, minimum wages,
unemployment benefits, mobility costs and fixed-costs of self-employment) and learning affect who and when people become self-employed.
We find that certain ability groups of workers become self-employed for both “carrot” and “stick” reasons: Some prefer self-employment
to the low institutionalised wage, while others are not productive enough to qualify for a job at the institutionalised wage.
Furthermore, wage compression and learning may give rise to a class of switchers who start in wage employment and later switch
to self-employment. Several predictions of the model are consistent with observed empirical regularities, such as the existence
of a group of low-skilled self-employed workers, the increasing propensity for self-employment over age groups and the larger
spread in earnings among self-employed. |
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Keywords: | |
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