Working Paper: NBER ID: w22446
Authors: Joshua D. Gottlieb; Richard R. Townsend; Ting Xu
Abstract: Do potential entrepreneurs remain in wage employment because of concerns that they will face worse job opportunities should their entrepreneurial ventures fail? Using a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date, we study whether the option to return to a previous job increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.9 percentage points. These entrepreneurs start incorporated businesses that hire employees—in industries where experimentation before entry has low costs and high benefits.
Keywords: entrepreneurship; job-protected leave; career risk
JEL Codes: H50; J13; J16; J65; J88; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduced career risk (J62) | increased likelihood of starting incorporated businesses (L26) |
| mothers with entrepreneurial ideas use leave to explore them (L26) | increased entrepreneurship (L26) |
| mothers without initial entrepreneurial intentions develop ideas during leave (L26) | increased entrepreneurship (L26) |
| high wage penalties associated with leaving for entrepreneurship (L26) | stronger effect of extended leave on entrepreneurship (L26) |
| extended job-protected leave (J22) | increased entrepreneurship among mothers (L26) |
| mothers who gave birth just after the cutoff (J13) | increased entrepreneurship compared to those before cutoff (L26) |