Entrepreneurial Beginnings: Transitions to Self-Employment and the Creation of Jobs

Abstract

Owner-operated firms are an important part of the New Zealand economy. They employ approximately 30% of the private-for-profit workforce, as well as providing jobs and income to the working proprietors themselves. This paper addresses two questions: what characteristics are associated with entrepreneurship (starting a self-employed business); and which sorts of entrepreneurs are more successful (create jobs)? We pay particular attention to differences in start-up and survival rates by business owner sex and ethnicity, but also consider whether other individual characteristics (including age and skill) and prior job characteristics also relate to the decision to start a business or to create jobs. We find substantial negative gaps in entrepreneurship for females and non-European-only ethnicity groups – gaps that arise in large part because of differential rates of entry into self-employment and, in the case of non-European-only ethnicities, higher attrition rates from self-employment after entry. These gaps persist in the presence of controls for skill, prior labour market experience and other individual characteristics.