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Experimenting with entrepreneurship: The Effect of job-protected leave

TitleExperimenting with entrepreneurship: The Effect of job-protected leave
Year of Publication2016
AuthorsGottlieb, J. D., Townsend R. R., and Xu T.
JournalNBER Working Paper
Date PublishedJuly

Do potential entrepreneurs remain in wage employment because of the danger 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 1.8 percentage points. The results are driven by more educated entrepreneurs, starting firms that survive at least five years and hire paid employees, in industries where experimentation is more valuable.