Working Paper No. 1059

Jobs Incorporated: Incorporation Status and Job Creation

Published: March 6, 2015Pages: 26Keywords: Entrepreneurship; Incorporation; Job creation; Occupational choice; Self-employment; Stars and misfitsJEL-codes: J24; L26
Published version

Jobs Incorporated: Incorporation Status and Job Creation Thomas Åstebro and Joacim Tåg


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.

Joacim Tåg

Contact

Ph: +46 8 665 4524
joacim.tag@ifn.se

Thomas Åstebro

Contact

Ph: +33 1 39677483
astebro@hec.fr

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

About the book

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se