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The effect of employment in new firms on a career path: Is it a stepping stone toward long-term employment?
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation. (Economics)ORCID iD: 0000-0003-1173-0853
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Previous research shows that new firms provide unstable employment because the risk of failure of new firms is high. At the same time, new firms attract and employ a disproportionately larger share of individuals with weaker positions in the labour market. This paper studies the role new firms play in determining the career paths of their employees and analyses whether short- term employment in new firms (employment lasting less than one year) may serve as a stepping stone towards long-term employment (at least two years of employment with the same employer) for non-employed individuals. Individual-level data from a Swedish matched employee-employer database are used collected from five years (2001-2005). A propensity score analysis is used in the empirical analysis. The findings indicate that short-term employment in new firms may serve as a stepping stone towards a long-term employment for both women and men. Moreover, the new firm effect on the probability of long-term employment is positive even for new firm employees who leave their firms involuntarily due to firm closure.

National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-192518OAI: oai:DiVA.org:kth-192518DiVA: diva2:970500
Note

QC 20160914

Available from: 2016-09-13 Created: 2016-09-13 Last updated: 2016-09-14Bibliographically approved
In thesis
1. Employment in New Firms: Mobility and Labour Market Outcomes
Open this publication in new window or tab >>Employment in New Firms: Mobility and Labour Market Outcomes
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis studies the role of new firms in the labour market and uses Swedish data to analyze labour mobility in new firms, including both transitions of workers into and from new firms. In particular, it focuses on employees’ wages in new firms and post-new firm employment labour market outcomes as transitions into long-term employment and entrepreneurship. 

This thesis consists of four essays. The first two essays concern labour mobility into new firms. The last two essays focus on post-new firm employment mobility.

The first essay explores the role of new firms as an entry point into the labour market for individuals with little (or no) labour market experience. The findings show that the wage penalty found in previous research, which includes more heterogeneous groups of employees, decreases once the focus is solely on labour market entrants. 

The second essay investigates whether there is a wage penalty for being employed at a new firm if the individual employee’s experience and status in the labour market are taken into account; this essay focuses on individuals who decide to switch jobs. The findings show that there is a wage penalty for being employed at a new firm; however, considering a random selection into new firms may underestimate the wage differentials.

The third essay studies the role that new firms play for the career path of their employees. In particular, this paper analyzes whether short-term employment in new firms (employment lasting less than one year) may serve as a stepping stone toward long-term employment (at least two years of employment with the same employer) for non-employed individuals. The findings indicate that short-term employment in new firms may serve as a stepping stone toward long-term employment.

The fourth paper examines the new firm effect on entrepreneurship, which the findings indicate is positive and statistically significant; this effect remains even after controlling for a worker's ability and shows that employees with both high and low levels of ability may transition to entrepreneurship.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2016. 55 p.
Series
TRITA-IEO, ISSN 1100-7982 ; 2016:10
Keyword
New firms, labour market entrants, wage penalty, job switchers, employment, long-term employment, stepping stone hypothesis, entrepreneurship, self-employment
National Category
Economics and Business Economics
Research subject
Economics
Identifiers
urn:nbn:se:kth:diva-192510 (URN)978-91-7729-099-5 (ISBN)
Public defence
2016-10-05, F3, Lindstedtsvägen 26, Stockholm, 10:00 (English)
Opponent
Supervisors
Note

QC 20160916

Available from: 2016-09-16 Created: 2016-09-13 Last updated: 2016-09-16Bibliographically approved

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