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Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?

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  • Ross Levine
  • Yona Rubinstein

Abstract

We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated—as teenagers—scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of “smarts” and “aggressive/illicit/risk-taking” tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19276.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19276

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