Publications

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"Stars and Misfits: Self-Employment and Labor Market Frictions" (with Thomas Astebro and Peter Thompson), Management Science, forthcoming.

　

"Disagreement, Employee Spinoffs, and the Choice of Technology" (with Peter Thompson), Review of Economic Dynamics, 14(2011): 455-474.

　

   

Working Papers

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The Small Firm Effect and the Quality of Entrepreneurs

This version: September 2011

This paper argues that the observed small firm effect on the spawning of employee entrepreneurs may be driven by the possibility that small firm employees have acquired specific human capital in industries where new business creation happens to incur low entry costs. To explore the plausibility of this alternative explanation, versus the existing theories for the small firm effect, this paper examines the persistence of the small firm effect on new business survival and the founders’ post-entry occupational choice. Using employer-employee matched panel data obtained from Statistics Denmark, I find that the size of entrepreneurs’ prior employers continues to have a negative correlation with the survival of startups for the initial four years, but the size effect gradually fades away afterwards. The magnitude of the correlation is largely reduced if the new businesses were formed in sectors that are unrelated to founders’ parent firms. Moreover, entrepreneurs coming from small firms are much more likely to move into unemployment if their first startups did not survive. These results suggest that the higher rate of entrepreneurial spawning observed in small firms might be largely attributed to the existence of necessity entrepreneurs, while lower barriers of entry in sectors clustered by small firms and related industry experience further facilitate the transition into self-employment for small firm employees.

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Selection and Serial Entrepreneurs

This version: June 2011

There is substantial evidence that serial entrepreneurs outperform de novo entrepreneurs. But is this positive association between prior experience and performance the result of learning by doing or of selection on ability? This paper proposes a strategy that combines the fixed-effects model and IV estimations to distinguish empirically selection effects from learning. Using panel data from the NLSY79, I find that selection on ability is the more important determinant of serial business formation and the early performance of new businesses. In contrast, the effects of learning by doing are apparent only when the analysis focuses on founding new startups in sectors closely related to entrepreneurs’ previous ventures.

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Wealth Constraints and Self-Employment: Evidence from Birth Order

This version: December 2010         

I revisit the question of whether entrepreneurs face liquidity constraints in business formation. The principle challenge is that wealth is correlated with unobserved ability, and adequate instruments are often difficult to identify. This paper uses the son’s birth order as an instrument for household wealth. The instrument would likely not be useful in Western data, but it is in many non-Western cultures where primogeniture remains important. I exploit the data available in the Korean Labor and Income Panel Study, and find evidence of liquidity constraints associated with self-employment in South Korea.

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Who Benefits from Firm Growth? An Analysis of Technology Effects on Job Turnover

This version: October 2007          

Motivated by the previous empirical finding that white-collar workers had higher turnover rates than blue-collar workers during firm expansion, this paper further examines job turnover among workers with or without specific skills when firm growth is driven by technology upgrading. To induce the intuition, I first present a simple search-matching model, which predicts that when firm growth is driven by technological advance, workers whose skills are specific to the obsolete technology show a higher tendency to separate from their jobs. This hypothesis is tested with an individual-level data set constructed from the Panel Study of Income Dynamics. There I find supportive evidence that in the context of industry-wide technological change, being on an occupation requiring specific skills, such as computer specialists, engineers, or professional workers, increases the odds of job separation by nearly eight percent.

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The Growth Effects of Intrinsically Worthless Education

This version: December 2006

A positive relationship between individual earnings and education has been repeatedly justified by microeconomic theory and is also strongly supported by its empirical evidence. Although theoretical growth models have predicted even deeper links between education and growth, empirical work at the aggregate level hasn’t been able to provide strong evidence consistent with this theoretical prediction. Some studies have attributed the inconsistency between micro and macro evidence to the primary signaling function of education, which does little to increase individual’s productivity, and in turn is regarded as having no significant effects on growth. This paper develops a growth model taking individuals’ innate ability into account, and explores the possibility that even if education only serves as means to signal innate ability, it still can have positive effects on growth if it helps to distinguish the high-ability labor from the low-ability, so that the most able individuals can be allocated to the knowledge creation sector and consequently increase economic growth.   

　

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