Research
Small Employers as Origins of Entrepreneurship (Job Market Paper)
Using large-scale administrative data, I find that small employers are important for future entrepreneurship. Within industry and a rich set of controls, workers at smaller employers have a higher likelihood of starting their own firm. Furthermore, the likelihood of a founder starting a successful new firm, measured by growth and survival, is higher if they previously worked at a small, successful employer. These two facts are consistent with learning entrepreneurial human capital at smaller firms and are supported by additional suggestive evidence. First, the longer a worker spends at their smaller employer, the more likely they are to start a successful firm, suggesting that they are learning successful business processes at their employer. Second, new firms are more likely to succeed if they are started in the same narrow industry as the employer, which aligns with learning specific skills. Lastly, founders from small, successful employers are only more likely to succeed if they start high-growth new businesses rather than enter self-employment. Overall, small employers house nascent entrepreneurs and likely provide valuable entrepreneurial learning.
Self-employment as imperfect wage substitution joint with Alex Martin
Individuals can supply labor to the market in two key ways: formal employment or self-employment. In most economic labor supply models, extensive-margin incentives for both types are aligned and therefore many policies aimed at changing labor supply decisions affect both types similarly, such as tax cuts and cash transfers. Access to childcare is different because it removes the need for more flexible work that may have pushed parents into self-employment and therefore may have opposite effects on formal wage work outcomes versus self-employment. We exploit variation in subsidized Pre-Kindergarten (Pre-K) to understand how access to childcare impacts mothers’ labor supply across state policies and child ages. Our paper finds that access to low-cost childcare increases wage work but decreases self-employment, particularly for women. This is evidence that many mothers face barriers to wage work and turn to self-employment. Moreover, we provide evidence that this self-employment activity is less profitable than wage work and persists once formal wage work is possible, suggesting a further positive externality to universal childcare policies. Not only does subsidized childcare encourage wage work, but it decreases sticky, low-profitability self-employment.
Personal Debt and Entrepreneurs’ Risk-Taking joint with Tim de Silva
Entrepreneurship is a risky endeavor, yet little is known about what influences a founder’s risk-taking capacity. We use a change in Australia’s income-contingent student loan repayment schedule to study how entrepreneurs’ personal finances affect their business decisions. Income-contingent repayment reduces debt overhang and encourages entrepreneurial risk-taking because it requires repayments only in good (i.e., high-income) states, in which the project is successful, and no payments in bad (i.e., low-income) states. In ongoing work, we test whether changes in the burden of income-based repayment affect the riskiness of business ventures that entrepreneurs pursue.