TY - JOUR
T1 - Entrepreneurship and Financial Incentives of Return, Risk, and Skew
AU - Berkhout, Peter
AU - Hartog, Joop
AU - Van Praag, Mirjam
PY - 2016
Y1 - 2016
N2 - We focus on the role of the opportunity cost in the choice for entrepreneurship in favor of wage employment, that is, the wages given up as an employee. We argue that just like outside observers, potential entrepreneurs will face great difficulty to predict their earnings from entrepreneurship. The focus on earnings forgone may help to solve the lack of robust empirical support for the effect of financial incentives on the decision to become an entrepreneur. We find, consistent with standard theory, that a higher mean, lower variance, and higher skew in the relevant wage distribution reduce the likelihood of entrepreneurship.
AB - We focus on the role of the opportunity cost in the choice for entrepreneurship in favor of wage employment, that is, the wages given up as an employee. We argue that just like outside observers, potential entrepreneurs will face great difficulty to predict their earnings from entrepreneurship. The focus on earnings forgone may help to solve the lack of robust empirical support for the effect of financial incentives on the decision to become an entrepreneur. We find, consistent with standard theory, that a higher mean, lower variance, and higher skew in the relevant wage distribution reduce the likelihood of entrepreneurship.
UR - http://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954921416449&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes
U2 - 10.1111/etap.12219
DO - 10.1111/etap.12219
M3 - Journal article
VL - 40
SP - 249
EP - 268
JO - Entrepreneurship: Theory and Practice
JF - Entrepreneurship: Theory and Practice
SN - 1042-2587
IS - 2
ER -