How occupations shape self-employment entry: A multilevel approach

Occupations divide the labor market into separate repositories of skill, where labor market frictions hinder employee mobility between occupations. Such frictions shape the supply of skill, the wage structure of each occupation, and the occupation-specific opportunity cost and marginal utility of self-employment entry. We investigate why self-employment entry is dependent on occupation, using 7 years of employee-employer matched panel data from Sweden. We test a multilevel survival model where employees are nested in occupations, and where the wage structure of each occupation determines the likelihood and type of employees’ self-employment entry. The results suggest that 50% of all incorporated entries are generated by only 7 occupations, 41% of the total variance is explained on the occupational level, and wage variance is the most important occupation-level predictor. Implications for research are discussed.