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Stairway to Heaven? Selection into Entrepreneurship, Income Mobility and Firm Performance

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  • Harju, Jarkko
  • Juuti, Toni
  • Matikka, Tuomas

Abstract

Using full-population data from Finland, we show that individuals at the top of the income distribution are significantly more likely to start new incorporated businesses compared to others. There is no similar selection based on parental income, but more than half of new entrepreneurs have entrepreneurial parents. Individual income gains from entrepreneurship are similar across different background characteristics, but parental entrepreneurship and personal income are positively linked to key firm-level outcomes such as productivity and job creation. This highlights the importance of the intergenerational transmission of entrepreneurial skills and suggests that businesses established by high-income individuals generate largest positive spillovers.

Suggested Citation

  • Harju, Jarkko & Juuti, Toni & Matikka, Tuomas, 2024. "Stairway to Heaven? Selection into Entrepreneurship, Income Mobility and Firm Performance," Working Papers 168, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:168
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    1. Tuuli Paukkeri & Terhi Ravaska & Marja Riihelä, 2023. "The role of privately held firms in income inequality," IFS Working Papers W23/36, Institute for Fiscal Studies.

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    More about this item

    Keywords

    entrepreneurship; income mobility; inequality; productivity; Social security; taxation and inequality; Business taxation and regulation; L26; J24; J3; fi=Tulonjako ja eriarvoisuus|sv=Inkomstfördelning och ojämlikhet|en=Income distribution and inequality|;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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