The Returns to Entrepreneurship in the Labor Market

Jeroen Mahieu

Research output: PhD ThesisPhD-Thesis – Research and graduation external


The aim of this dissertation is to extend prior work on the private and social returns to entrepreneurship by investigating how and why: (i) a spell of entrepreneurship relates to an individual's future earnings trajectory in the labor market, and (ii) local demand shocks affects job creation through new firm formation. Regarding the first research question, the findings show that in rigid labor markets - like Belgium - former entrepreneurs suffer substantial wage losses in the short- and medium-term after exiting entrepreneurship: five years after they have returned to paid employment, former entrepreneurs earn significantly less than similar employees without an entrepreneurial background. We propose that uncertainty regarding the productivity of ex-entrepreneurs in wage work can explain the initial wage penalty. However, after extensive exploration of various potential explanations for the long-term penalty, we still find a non-negligible part that remains unexplained. We label this the wage persistence puzzle. Regarding the second question, I examine which types of firms in sectors related to rebuilding and recovery create jobs in the periods after a region is hit by a hurricane. I find that startups account for a disproportionate share of job creation. I link these findings to theories of rent-sharing where incumbent workers of established firms capture part of the profits that result from positive demand shocks. Startups, by virtue of being new, do not need to raise wages, which explains their higher responsiveness to local economic shocks in terms of job creation.
Original languageEnglish
Awarding Institution
  • KU Leuven
  • Van Looy, Bart, Supervisor, External person
  • Melillo, Francesca , Supervisor, External person
Award date26 Aug 2020
Publication statusPublished - Aug 2020


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