Prior wage and the returns to entrepreneurship

Jeroen Mahieu, Francesca Melillo, Toke Reichstein

Research output: Contribution to ConferencePaperAcademic

Abstract

Are failed entrepreneurs penalized in the labour market? The answer is yes under certain conditions. Using a novel dataset of matched entrepreneurs and employees in Belgium, we show that: (i) on average, entrepreneurs returning to the labour market after a business failure are penalized, but this effect is most pronounced for those coming from the higher echelons of the wage distribution, and absent for those who earned relatively little before entering self-employment. (ii) the penalty is only present for entrepreneurs who fail quickly: entrepreneurs returning to the labour market after 5 or more years do not get penalized. (iii) entrepreneurs who fail fast and move to a new employer limit the wage penalty by changing industry compared to the industry they were venturing in. These results are consistent with theories of adverse selection in the labour market.

Original languageEnglish
DOIs
Publication statusPublished - 1 Jan 2018
Externally publishedYes
Event78th Annual Meeting of the Academy of Management, AOM 2018 - Chicago, United States
Duration: 10 Aug 201814 Aug 2018

Conference

Conference78th Annual Meeting of the Academy of Management, AOM 2018
CountryUnited States
CityChicago
Period10/08/1814/08/18

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