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

32 Pages Posted: 26 Sep 2017

See all articles by Arvid Raknerud

Arvid Raknerud

Statistics Norway - Research Department

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2017

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.

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

JEL Classification: C23, G32, J31, L26

Suggested Citation

Raknerud, Arvid and van Praag, Mirjam and van Praag, Mirjam, The Returns to Entrepreneurship: Evidence from Matched Person-Firm Data (September 2017). CEPR Discussion Paper No. DP12330, Available at SSRN: https://ssrn.com/abstract=3042643

Arvid Raknerud (Contact Author)

Statistics Norway - Research Department ( email )

P.O. Box 8131 Dep, N-0033
N-0033 Oslo
Norway

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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