Job Loss and Entrepreneurship

Knut Røed and Jens Fredrik Skogstrøm.

University of Oxford

Photo: University of Oxford

Published in:

Oxford Bulletin of Economics & Statistics 2014  76 (5) p.p. 727-744.

DOI: 10.1111/obes.12042


We examine the impact of job loss on entrepreneurship behaviour. Our identification strategy relies on the use of mass layoffs caused by bankruptcies as indicators of exogenous displacement. Building on Norwegian register data, we find that working in a company which is going to close down due to bankruptcy in the near future raises the subsequent entrepreneur propensity by 155% for men and 180% for women, compared to working in a stable firm. These estimates are much larger than previously reported in the literature.Taking into account that many workers lose their jobs in the comparison group of stable firms also, we suggest that the full effects of displacement are even larger.

Published July 17, 2015 12:52 PM - Last modified July 17, 2015 12:52 PM