Occupational skill mismatch in self-employment: prevalence and income implications

Purpose This study explores the relationship between occupational skill mismatch and self-employment, examining both the likelihood of self-employment among those experiencing skill mismatches and the subsequent impact on entrepreneurial earnings. Design/methodology/approach We analyze data from the REFLEX Project involving 17,623 respondents across 13 countries, complemented by a post-hoc analysis of 43,536 respondents from the PIAAC dataset spanning 24 countries. Our methodology combines logistic regression to examine self-employment choice and OLS regression to analyze income effects. Findings Our analysis reveals three key findings: (1) in the REFLEX data, individuals reporting higher skill differences are more likely to be self-employed; (2) among self-employed individuals in the REFLEX sample, higher skill differences are associated with significantly lower income levels (negative interaction effect) and (3) in the PIAAC data, we find consistent effects. Originality/value This research provides an analysis of how occupational skill mismatches influence both self-employment choices and income outcomes across diverse geographic contexts. Our findings contribute to understanding the entrepreneurial earnings puzzle and offer practical implications for policymakers designing support programs for self-employed individuals.