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Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials

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  • Block, Joern
  • Wagner, Marcus

Abstract

Our paper uses data from the German Socio Economic Panel Study (GSOEP) to analyze how necessity and opportunity entrepreneurs differ in kind and in earnings and what the determinants of the latter are. We estimate probit and random effects panel data models in order to address these questions. We find that the two types of entrepreneurs differ as concerns age, gender and other characteristics, but not with regard to education levels. Furthermore, opportunity entrepreneurs earn significantly more in our sample and the determinants of earnings levels differ to some degree. We conclude that our findings indicate a need to distinguish between the two groups in entrepreneurship policy-making. The results also show that commonly used specifications of earnings equations in labour economics seem to work better for opportunity than for necessity entrepreneurs.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 610.

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Date of creation: 01 Apr 2006
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Handle: RePEc:pra:mprapa:610

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Keywords: opportunity entrepreneurship; necessity entrepreneurship; earnings equation; wage equation; entrepreneurship; Germany; GSOEP;

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  1. van der Sluis, Justin & van Praag, Mirjam & van Witteloostuijn, Arjen, 2007. "Why Are the Returns to Education Higher for Entrepreneurs than for Employees?," IZA Discussion Papers 3058, Institute for the Study of Labor (IZA).
  2. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
  3. von Hagen, Jürgen & Strauch, Rolf R. & Wolff, Guntram B., 2002. "East Germany: Transition with Unification ; Experiments and Experiences," ZEI Working Papers B 19-2002, ZEI - Center for European Integration Studies, University of Bonn.
  4. Brown, Sarah & Sessions, John G, 1998. "Education, Employment Status and Earnings: A Comparative Test of the Strong Screening Hypothesis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(5), pages 586-91, November.
  5. Matthias Benz & Bruno S. Frey, 2008. "Being Independent is a Great Thing: Subjective Evaluations of Self-Employment and Hierarchy," Economica, London School of Economics and Political Science, vol. 75(298), pages 362-383, 05.
  6. Pfeiffer, Friedhelm & Reize, Frank, 1998. "Business Start-ups by the Unemployed - an Econometric Analysis Based on Firm Data," ZEW Discussion Papers 98-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Devine, Theresa J. & Kiefer, Nicholas M., 1993. "The empirical status of job search theory," Labour Economics, Elsevier, vol. 1(1), pages 3-24, June.
  8. Parker,Simon C., 2004. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521828130, April.
  9. Zoltan J. Acs & Attila Varga, 2004. "Entrepreneurship, Agglomeration and Technological Change," Papers on Entrepreneurship, Growth and Public Policy 2004-06, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  10. repec:iza:izadps:dp624 is not listed on IDEAS
  11. Joachim Wagner, 2005. "Nascent Necessity and Opportunity Entrepreneurs in Germany. Evidence from the Regional Entrepreneurship Monitor (REM)," Labor and Demography 0506004, EconWPA.
  12. Reize, Frank, 2000. "Leaving unemployment for self-employment: a discrete duration analysis of determinants and stability of self-employment among former unemployed," ZEW Discussion Papers 00-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  14. Justin van der Sluis & Mirjam van Praag & Wim Vijverberg, 2003. "Entrepreneurship Selection and Performance," Tinbergen Institute Discussion Papers 03-046/3, Tinbergen Institute, revised 24 Sep 2004.
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