The role of wealth in the start-up decision of new self-employed: Evidence from a pension policy reform

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Abstract

We study whether wealth affects transitions from wage-employment to self-employment using a large sample from administrative panel data for the Netherlands. To isolate the causal effect of wealth, we rely on a reform of the pension system that abolished preferential tax treatment of early retirement for cohorts born after January 1, 1950. This exogenous reduction in pension wealth has a significant negative effect on the transition into self-employment. We compute that the average reduction of net future pension wealth by 16,000 euros in our sample, triggered by the reform, reduces the transition rate into self-employment by 38%.
Original languageEnglish
Pages (from-to)280-290
JournalLabour Economics
Volume41
Issue numberAugust
DOIs
Publication statusPublished - 2016

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