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Some influential studies show that many self-employed could apparently achieve higher earnings were they working in paid employment. One potential explanation for this 'return-to-entrepreneurship puzzle', not empirically tested yet, is that entrepreneurship entails non-monetary benefits, such as autonomy, flexibility, and task variety. Using German data and a decomposition analysis, I examine the contribution of these working conditions to the observed earnings differential between self-employment and paid employment. I confirm that self-employed individuals report lower earnings than what they are expected to earn in paid employment. However, differences in working conditions barely contribute to the earnings gap. This finding casts some doubt on the relevance of compensating differentials for explaining the return-to-entrepreneurship puzzle.

This paper compares two estimation methods of occupational skills transferability, both theoretically and empirically. The first method is based on Shaw’s (1984) study, and the second one is based on Ormiston’s (2014) study. The main difference between these two methods is that Shaw’s skills transferability is a “market” approach. It is estimated based on an actual occupational change. On the other hand, Ormiston’s skills transferability is a “skills” approach estimated based on the knowledge, skills, and abilities (KSAs) shared across occupations. Although these two approaches produce very different estimates of occupational skills transferability, both estimates significantly explain the earnings losses of displaced workers. In particular, the displaced workers who find jobs in occupations more similar to their previous jobs, as measured by occupational skills transferability, on average, suffer smaller earnings losses than those who find less similar jobs.

This paper provides precise figures on the incidence and wage penalties of mismatching in Germany. We use the BIBB/BAuA Employment Survey 2006 to compute two different measures of person-to-job matching. A first measure indicates an educational (mis)match, i.e., whether a worker’s attained level of education corresponds to the qualificational requirements of his or her job. Second, — and different from most other studies—we observe a skill (mis)match that reflects the correspondence between the skills of the job holder and the skill requirements of the job. We explore whether and the extent to which results on mismatch differ between these measures and explain the probability of being (mis)matched by different sets of worker and job characteristics. We also examine wage penalties for mismatching in Germany, considering a large number of controls for workers and, in addition to most earlier studies, job heterogeneity; we use random intercept models with workers nested in occupations. Our results indicate that large shares of over- or under-educated workers in Germany have skills that correspond to the skill requirements of their jobs. Furthermore, there are workers perfectly matched with respect to their education who, nevertheless, feel under- or over-challenged by their jobs’ skill requirements. Random intercept models reveal that beyond worker characteristics, i.e., human capital compensation (heterogeneous ability) and career mobility rationalities, job characteristics play a role in the mismatching variance and its real or apparent wage penalties.