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

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  • van Praag, Mirjam C.

    (Copenhagen Business School)

  • Raknerud, Arvid

    (Statistics Norway)

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.

Suggested Citation

  • van Praag, Mirjam C. & Raknerud, Arvid, 2017. "The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data," IZA Discussion Papers 11018, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11018
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    References listed on IDEAS

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    More about this item

    Keywords

    returns to entrepreneurship; earnings distribution; matched person-firm data; self-employment; random effects probit model;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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