Self-Employment and The Intergenerational Transmission of Human Capital

We use the European Community Household Panel Survey (ECHP) to investigate the determinants of self-employment. More precisely, we consider the influence of immediate social environments and social networks on the choice of self-employment. We conjecture that self-employment is correlated across generations because parents may transmit two classes of informal human capital to their offspring: (1) specific skills for a specific occupation and (2) general managerial skills such as the capacity to acquire autonomy, irrespective of the specific occupation. Our data allow us to dissociate those individuals who are first-generation self-employed from second-generation self-employed (i.e. those whose parents are self-employed), and, among second-generation self-employed, those individuals whose parents are in the same occupation as their offspring. Consistent with our assumptions, we show that having parents who are self-employed increases the probability of being self-employed, even when the individuals do not have the same occupation as their parents. We also observe strong differences between first and second generation self-employed workers. First-generation self-employed are generally younger and more educated than second generation self-employed. Finally our results indicate that first-generation self-employed report higher job satisfaction than second-generation self-employed.
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