« Back to Results

Entrepreneurship and the Labor Market

Paper Session

Friday, Jan. 5, 2018 2:30 PM - 4:30 PM

Marriott Philadelphia Downtown, Liberty Ballroom Salon B
Hosted By: American Economic Association
  • Chair: Patrick Legros, Free University of Brussels, Northeastern University and CEPR

Does Career Risk Deter Potential Entrepreneurs?

Joshua D. Gottlieb
University of British Columbia and NBER
Richard R. Townsend
University of California-San Diego
Ting Xu
University of Virginia


Do potential entrepreneurs remain in wage employment because of the danger that they will face worse job opportunities should their entrepreneurial ventures fail? Using a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date, we study whether the option to return to a previous job increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.8 percentage points. The results are driven by more educated entrepreneurs, starting firms that survive at least five years and hire paid employees, in industries where experimentation is more valuable.

Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence From France

Johan Hombert
HEC Paris
Antoinette Schoar
Massachusetts Institute of Technology, NBER, and CEPR
David Sraer
University of California-Berkeley, NBER, and CEPR
David Thesmar
Massachusetts Institute of Technology and CEPR


We investigate how a large-scale French reform to reduce the risk from small business
creation for unemployed workers, affects the composition of people who are drawn into entrepreneurship. New firms started in response to the reform are, on average, smaller, but
have similar growth expectations and education levels compared to start-ups before the reform.
They are also as likely to survive or to hire. However, there are large crowd-out effects:
Employment in incumbent firms decreases by a similar magnitude as the number of new jobs
created in start-ups. These results point to the importance of Schumpeterian dynamics when
facilitating entry.

Foreign Investments and Jobs: Evidence from US Venture Capital Investments in Sweden

Thomas Hellmann
University of Oxford
Joacim Tåg
Research Institute of Industrial Economics (IFN)


Prior research has shown that in the US venture capital is associated with job creation. We provide evidence that venture capital has a similar job creation effect in Sweden. We then ask whether, relative to domestic Swedish, foreign (especially US) venture capitalists create more jobs, but find no significant differences. US venture capital investments are associated with more US exits, but US exits have higher, not lower domestic post-exit employment growth. We also find evidence that venture capital is associated with local industry-specific employment growth. The effect is stronger for established companies than start-ups, and it is stronger for US than Swedish venture capital investments. Overall our results support the notion that, relative to domestic venture capital, foreign venture capital does not create fewer local jobs, and possibly create more.

Learning Within or Outside Firms? Labor Market Frictions and Entrepreneurship

Andrea Canidio
IMT Lucca and INSEAD
Patrick Legros
Free University of Brussels, Northeastern University and CEPR


When labor mobility is imperfect, employers (firms) will invest in the discovery of their employees' talent at different tasks; in this case, agents become entrepreneurs only if they have a valuable business idea or cannot find employment. If instead employees can easily move to other firms, employers have little incentive to invest in talent discovery. In this case, an additional motive for entrepreneurship emerges: learning one's comparative advantage over tasks. We develop such a model and show a causal relationship between the degree of labor-market frictions and the level of entrepreneurial activity; the value of entrepreneurial failures; the payoff of entrepreneurs relative to workers; the wage of former entrepreneurs relative to former workers; the degree of firms' short-termism; the rate of within-firm talent discovery.
The theoretical correlations between these variables are consistent with the evidence available for the US and continental Europe.
Christopher Stanton
Harvard Business School
Mark Duggan
Stanford University and NBER
Francine Lafontaine
University of Michigan
Robert Gibbons
Massachusetts Institute of Technology and NBER
JEL Classifications
  • L2 - Firm Objectives, Organization, and Behavior
  • J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers