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  • 2022
  • Working Paper
  • HBS Working Paper Series

The Transformation of Self Employment

By: Innessa Colaiacovo, Margaret Dalton, Sari Pekkala Kerr and William R. Kerr
  • Format:Print
  • | Language:English
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Abstract

Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.

Keywords

Self-employment; Startup Investment; Occupational Choice; Financing; Small Business; Entrepreneurship; Business Startups; Financing and Loans

Citation

Colaiacovo, Innessa, Margaret Dalton, Sari Pekkala Kerr, and William R. Kerr. "The Transformation of Self Employment." Harvard Business School Working Paper, No. 22-051, January 2022.
  • SSRN
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About The Author

William R. Kerr

Entrepreneurial Management
→More Publications

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More from the Authors
  • Centralization and Organization Reproduction: Ethnic Innovation in R&D Centers and Satellite Locations By: William R. Kerr
  • No Mask, No Service: Customer Reaction to Walmart’s 2020 National Mask Mandate By: Innessa Colaiacovo
  • When Scenario Planning Fails By: Kalle Heikkinen, William R. Kerr, Mika Malin, Panu Routila and Eemil Rupponen
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