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Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self‐Employment
Abstract
Possible explanations for earnings differentials in self‐employment and paid employment are investigated. The empirical results suggest that the nonpecuniary benefits of self‐employment are substantial: Most entrepreneurs enter and persist in business despite the fact that they have both lower initial earnings and lower earnings growth than in paid employment, implying a median earnings differential of 35 percent for individuals in business for 10 years. The differential cannot be explained by the selection of low‐ability employees into self‐employment and is similar for three alternative measures of self‐employment earnings and across industries. Furthermore, the estimated earnings differentials may understate the differences in compensation across sectors since fringe benefits are not included in the measure of employee compensation.
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Cites
Sample Selection Bias as a Specification Error
Heckman, J. J. (1979) · Econometrica · doi:10.2307/1912352 · Cited by 28,779
Cited by
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BECK, T., LEVINE, R., & LEVKOV, A. (2010) · The Journal of Finance · doi:10.1111/j.1540-6261.2010.01589.x · Cited by 3,358
Liquidity Constraints, Household Wealth, and Entrepreneurship
Hurst, E., & Lusardi, A. (2004) · Journal of Political Economy · doi:10.1086/381478 · Cited by 1,296
Entrepreneurship and role models
Bosma, N., Hessels, J., Schutjens, V., Praag, M. V., & Verheul, I. (2012) · Journal of Economic Psychology · doi:10.1016/j.joep.2011.03.004 · Cited by 784
Inventors and New Venture Formation: the Effects of General Self–Efficacy and Regretful Thinking
Markman, G. D., Balkin, D. B., & Baron, R. A. (2002) · Entrepreneurship Theory and Practice · doi:10.1111/1540-8520.00004 · Cited by 552
The impact of entrepreneurship education in high school on long-term entrepreneurial performance
Elert, N., Andersson, F. W., & Wennberg, K. (2015) · Journal of Economic Behavior & Organization · doi:10.1016/j.jebo.2014.12.020 · Cited by 290
Metadata
- Authors
- Hamilton, B. H.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 2000-06
- Volume
- 108
- Issue
- 3
- Pages
- 604-631
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W1975688239
- Cited by
- 1,845
- References
- 1
- FWCI
- 48.33
- Type
- journal article
- Language
- en
- Open access
- closed
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
