Entrepreneurial skills and workers’ wages in small

Authors: Rui Baptista Francisco Lima Miguel Torres Preto

Publish Date: 2012/12/08

Volume: 40, Issue: 2, Pages: 309-323

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Abstract

This paper contributes to the understanding of how small firms are organized and managed It tests an entrepreneurworker matching model in small entrepreneurial firms The model contemplates the existence of complementarities between workers’ and entrepreneur’s skills Using a Portuguese longitudinal matched employer–employee dataset for the period 1995–2003 the empirical analysis provides descriptive results consistent with the matching model skill stratification—entrepreneurs are more skilled than workers scale effects—more skilled entrepreneurs run larger firms though limited by the restriction on firm size and positive sorting—more skilled entrepreneurs matched with more skilled workers The estimation of wage regressions shows that the higher the level of education and experience of the entrepreneur the higher the wage premium for workers Results suggest that workers’ wages reflect the value of the match with entrepreneur’s skills Thus entrepreneurial skills have an impact not only on job creation but also on the quality of jobs createdWe are indebted to the Portuguese Ministry of Solidarity and Social Security GEP for allowing us access to the data used in this paper Financial support from the Portuguese Science and Technology Foundation grants PTDC/ESC/71080/2006 and PTDC/EGEECO/118070/2010 is gratefully acknowledged We are indebted to Riccardo Leoni Tor Eriksson Fátima Suleman and the participants at the meetings of DRUID CAED COST CoDE FlexWorkshop and the 3rd HEC Workshop on Entrepreneurship for comments on earlier drafts

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