2016

Hierarchies and Entrepreneurship

Reprint No. 2016:44

Author(s): Joacim Tåg, Thomas Åstebro and Peter ThompsonYear: 2016 Title: European Economic Review Volume (No.): 89 (October) Pages: 129–147
Online article (restrictions may apply)
Preliminary version


We establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees, using a sample of 16 million observations of Swedish workers and a novel proxy for hierarchies based on occupation data. Conditional on firm size and many other variables, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills. One test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting.


Reference:
Tåg, Joacim, Thomas Åstebro och Peter Thompson (2016), "Hierarchies and Entrepreneurship". European Economic Review 89(October), 129–147.

Joacim Tåg

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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?

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