Experimenting with Entrepreneurship: The Effect of Job-Protected LeaveTuck School of Business Working Paper No. 2714577 (2016)
Do potential entrepreneurs remain in wage employment because of the danger that they will face worse job opportunities should their entrepreneurial ventures fail? We examine empirically whether granting employees extended leaves of absence, during which they are guaranteed the option to return to their previous job, increases entry into entrepreneurship. We exploit a Canadian reform in 2000 that guaranteed extended job-protected leave of up to one year for women giving birth after a cutoff date. Using a regression discontinuity design, we find that the increase in job-protected leave increases the probability of becoming an entrepreneur by approximately 35%. The results are not driven by inconsequential businesses that quickly fail---the marginal entrepreneurs spurred to enter by the reform tend to hire paid employees. The effect is stronger for individuals with more human and financial capital. Overall, we conclude that career considerations are a major factor inhibiting entry into entrepreneurship.
- Job-Protected Leave,
- Real Option,
Publication DateJanuary 12, 2016
Citation InformationJoshua D. Gottlieb, Richard Townsend and Ting Xu. "Experimenting with Entrepreneurship: The Effect of Job-Protected Leave" Tuck School of Business Working Paper No. 2714577 (2016)
Available at: http://works.bepress.com/joshua_gottlieb/16/