Essays on Economics of Entrepreneurship

This dissertation examines three important issues. The first issue is about the human capital investment and entrepreneurship as a career choice. The standard human capital theory shows that firms (employees) never invest in general (firm-specific) human capital of the employee as they do not extract any return from it. However, when entrepreneurship is introduced as a career option for an innovative employee, both firm’s and employee’s human capital investments change. Employee starts investing in his firm-specific human capital to increase the probability to innovate (and to become an entrepreneur). However, the firm uses general human capital investment to reduce the risk of employee’s departure. The second issue is regarding the factors motivating entry regulations reforms and the possible nonlinear effects of entry regulation reforms. The current literature and the policy recommendations assume that these reforms have linear effects on entrepreneurship. Nevertheless, the anecdotal evidence shows that the outcomes of such reforms vary greatly from country to country. To investigate this issue, I collect a sample data on entry regulations and firm creation from World Bank. The empirical analysis indicates that the effect of entry regulation reforms depends on the pre-reform level of bureaucracy in the country. More specifically, while low-bureaucracy countries benefit from entry regulation reforms, high-bureaucracy countries do not benefit. Moreover, the probability of making a reform increases if the country has reformist neighbors, cumbersome entry regulations, high unemployment rate, or low corruption level. The last issue is related to the individual and joint effects of bureaucracy and corruption on different types of entrepreneurs. The current literature investigates these effects only on unified measures of entrepreneurship. However, entrepreneurs are very different in many senses. To address this issue, I collect the necessity-based and opportunity-based entrepreneurship data from Global Entrepreneurship Monitor. The empirical analysis yield two important results: First, bureaucracy has a direct negative (positive) effect on necessity-based (opportunity-based) entrepreneurs. Second, corruption mitigates the effect of bureaucracy for both groups of entrepreneurs. All three chapters offer useful insights and important implications to academics and policymakers.

Earnings Variability and Earnings Instability of Women and Men in Canada: How Do the 1990's Compare to the 1980's (Working Paper 25)

It seems to be generally assumed that earnings instability has increased in the last decade or so, as earnings inequality has widened, but is this indeed the case, and if so, to what degree? This paper builds on earlier U.S. work to look at the total variance in individuals’ earnings with a focus on the distinction between permanent earnings variation associated with factors such as human capital investments or other persistent worker attributes, and transitory earnings variation or instability for a given individual from one year to another. We find that there was an increase in overall earnings variability, especially for men, but that the greatest part of this increase was driven by the permanent component – that is, by a widening dispersion of (life-cycle) earnings differentials across workers. The increased volatility of workers’ earnings about their life-cycle earnings profiles played a secondary role in the overall increase in men’s earnings variability, whereas for women this effect was very small or even worked in the opposite direction (depending on the particular age group). Patterns by age and region are also investigated.