The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data

Mirjam Van Praag; Arvid Raknerud

The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data

Research output: Working paper › Research

Abstract

Empirical studies show low pecuniary returns of switching from wage employment to entrepreneurship. We reconsider the pecuniary gains of this switching by employing a two-stage procedure, where the randomness in the timing of inheritance transfers is used as an exclusion restriction to identify causal effects. The model is estimated on data covering the whole Norwegian population of individuals matched to the entire population of firms established in the period 2002-2011. The results indicate that the average returns to entrepreneurship are significantly negative for individuals entering entrepreneurship through self-employment and modest, but significantly positive, for incorporated startups.

Original language	English
Place of Publication	Bonn
Publisher	IZA
Number of pages	29
Publication status	Published - 2017

Series	IZA Discussion Paper
Number	11018

Series	Centre for Economic Policy Research. Discussion Papers
Number	12330
ISSN	0265-8003

Keywords

Returns to entrepreneurship
Earnings distribution
Matched person-firm data
Self-employment
Random effects probit model

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title = "The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data",

abstract = "Empirical studies show low pecuniary returns of switching from wage employment to entrepreneurship. We reconsider the pecuniary gains of this switching by employing a two-stage procedure, where the randomness in the timing of inheritance transfers is used as an exclusion restriction to identify causal effects. The model is estimated on data covering the whole Norwegian population of individuals matched to the entire population of firms established in the period 2002-2011. The results indicate that the average returns to entrepreneurship are significantly negative for individuals entering entrepreneurship through self-employment and modest, but significantly positive, for incorporated startups.",

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KW - Matched person-firm data

KW - Self-employment

KW - Random effects probit model

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