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

Mirjam Van Praag, Arvid Raknerud

    Research output: Working paperResearch

    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.
    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.
    LanguageEnglish
    Place of PublicationBonn
    PublisherIZA
    Number of pages29
    StatePublished - 2017
    SeriesIZA Discussion Paper
    Number11018
    SeriesCentre for Economic Policy Research. Discussion Papers
    Number12330
    ISSN0265-8003

    Keywords

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

    Cite this

    Van Praag, M., & Raknerud, A. (2017). The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data. Bonn: IZA. IZA Discussion Paper, No. 11018, Centre for Economic Policy Research. Discussion Papers, No. 12330
    Van Praag, Mirjam ; Raknerud, Arvid. / The Returns to Entrepreneurship : Evidence from Matched Person-Firm Data. Bonn : IZA, 2017. (IZA Discussion Paper; No. 11018). (Centre for Economic Policy Research. Discussion Papers; No. 12330).
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    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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    The Returns to Entrepreneurship : Evidence from Matched Person-Firm Data. / Van Praag, Mirjam; Raknerud, Arvid.

    Bonn : IZA, 2017.

    Research output: Working paperResearch

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    AU - Van Praag,Mirjam

    AU - Raknerud,Arvid

    PY - 2017

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    N2 - 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.

    AB - 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

    KW - Returns to entrepreneurship

    KW - Earnings distribution

    KW - Matched person-firm data

    KW - Self-employment

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