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Heterogeneous entrepreneurs from occupational choices in economies with minimum wages

Author

Listed:
  • Luis Medrano-Adán
  • Vicente Salas-Fumás
  • J. Sanchez-Asin
Abstract
This paper examines how the distribution of skills, organizational diseconomies of size, and the introduction of a minimum wage affect the total output of the economy and the relative size and average per capita income of employees, solo self-employed, and employers, in a market equilibrium from occupational choices of individuals with different skills. The model explains the heterogeneity observed among occupational groups beyond employers and employees, and predicts differences in the sing of the association between entrepreneurs’ rates and economic development depending on the entrepreneurs’ type. The introduction of a minimum wage leads to involuntary solo self-employed, more skilled voluntary solo self-employed, and fewer employers. A minimum wage lowers total output and has income redistribution effects: income per capita decreases in the individuals in the two extremes of the skills’ distribution and increases in the middle class. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Luis Medrano-Adán & Vicente Salas-Fumás & J. Sanchez-Asin, 2015. "Heterogeneous entrepreneurs from occupational choices in economies with minimum wages," Small Business Economics, Springer, vol. 44(3), pages 597-619, March.
    • Handle: RePEc:kap:sbusec:v:44:y:2015:i:3:p:597-619
    DOI: 10.1007/s11187-014-9610-4
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    Cited by:

    1. Ganserer, Angelika & Gregory, Terry & Zierahn, Ulrich, 2022. "Minimum Wages and the Rise in Solo Self-Employment," IZA Discussion Papers 15283, Institute of Labor Economics (IZA).
    2. Lahiri, Bidisha & Daramola, Richard, 2023. "Effects of credit and labor constraints on microenterprises and the unintended impact of changes in household endowments: Use of threshold estimation to detect heterogeneity," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 21-38.
    3. Luis Medrano-Adán & Vicente Salas-Fumás & J. Javier Sanchez-Asin, 2019. "Firm size and productivity from occupational choices," Small Business Economics, Springer, vol. 53(1), pages 243-267, June.
    4. Luis Medrano-Adán & Vicente Salas-Fumás, 2022. "The added value of management skill in the explanation of the distribution of firm size," Small Business Economics, Springer, vol. 58(3), pages 1379-1405, March.
    5. Kwapisz Agnieszka, 2020. "Minimum Wages and Nascent Entrepreneurship in the US," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-15, January.

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    More about this item

    Keywords

    Occupational choices; Heterogeneous entrepreneurs; Minimum wages; Productivity; D24; J24; K31; L26;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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