market outcomes. They found that, relative to continued wage employment, brief spells in self‐employment probably reduce average hourly earnings of subsequent wage employment. They also found that those who experience self‐employment have difficulty returning to the wage sector. However, when the consequences are compared to similar experiences in unemployment, they are relatively not as large. Also, their research implies that wage differentials are mostly due to occupational change that is usually associated with self‐employment, not dissimilar to changing occupations in wage work. Overall, Bruce and Schuetze (2004) did not find strong evidence of scarring.

There is also some limited evidence that suggests self‐employment scarring in Europe. Kaiser, Malchow‐Moller (2011) used propensity score matching with data on Danish men for the years 1990‐1996 to investigate the effects of past self‐employment on subsequent earnings. They identified a negative effect of self‐employment caused by the sector switching with which it is commonly associated. They estimated that those returning to wage employment after a spell of self‐employment earned 2.9% less than the consecutively wage‐employed. However, the difference was slightly smaller when the formerly self‐ employed were compared with wage earners that had also changed jobs. A much broader empirical investigation has been done by Hyytinen and Rouvinen (2008) who use data from the European Community Household Panel (ECHP). While they also found evidence that those entering wage employment after a period of self‐employment suffer a wage penalty, this is likely mostly due to self‐selection that correlates negatively with unobserved ability and/or productivity. In addition, they also find that wage scarring from self‐employment is less than wage scarring from unemployment.

Another form of employment that may cause a scarring effect is employment that is not full‐ time and permanent. That is, temporary, casual and part time work (henceforth non‐ fulltime). Again, scarring in terms of employment probability and wages resulting from periods of non‐fulltime employment may occur when the human capital implications of being in non‐fulltime employment are similar to that of being unemployed. The rate of human capital accumulation may vary systematically according to the type of employment contract. Firms may have a greater incentive to invest in firm specific human capital for permanent employees than for temporary workers. This is because the expected time horizon for the realization of returns to such investment should be longer for full‐time workers than for temporary workers. Similarly, long term part‐time workers may also receive less training and development simply because they play a less central role in the firm than the full‐time workers. Indeed, Nelen and de Grip (2009) found using data from the 2007 Dutch Life‐Long‐Learning Survey that part‐time workers have different determinants for formal training and informal learning than full‐time workers. Full‐time workers seem to benefit from firms' human resource practices such as performance interviews, personal development plans, and feedback while part‐time works do not.

7