Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1059: Jobs Incorporated: Incorporation Status and Job Creation

Thomas Åstebro () and Joacim Tåg ()
Additional contact information
Thomas Åstebro: HEC Paris, Postal: 1 rue de la Liberation, 78351 Jouy-en-Josas Cedex, France
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Recent research has shown that entrepreneurs who start incorporated firms are fundamentally different from entrepreneurs who start sole proprietorships. This difference suggests that incorporation status may distinguish the self-employed with no ambition to hire from entrepreneurs who plan to hire others.In this paper, we show that this intuition is correct. Using a dataset with over 24 million observations and more than 230,000 entries into entrepreneurship, we show that newly incorporated entrepreneurs create 50% more jobs than sole proprietors. The result derives from the fact that high-ability individuals are more likely to form incorporated ventures. While there is selection from both tails of the ability distribution into starting incorporated ventures – that is, both stars and misfits start corporations – it is primarily individuals with low ability, the misfits, who start sole proprietorships. This does not, however, mean that the aggregate number of jobs created by the incorporated is higher. Since more entrepreneurs in total become sole propri etors, the sole proprietors initially contribute more to aggregate job creation than the incorporated.

Keywords: Entrepreneurship; Incorporation; Job creation; Occupational choice; Self-employment; Stars and misfits

JEL-codes: J24; L26

26 pages, March 6, 2015

Full text files

wp1059.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:47.