When ability complements effort, we would expect effort to increase with variables that proxy for ability. For example, we show that the hours worked by entrepreneurs should increase in experience, a proxy for ability. Yet, even if education is positively correlated with entrepreneurial ability, it is shown that the relationship between education and hours worked is ambiguous. This is because education allows small business owners to work outside the venture (moonlight) at higher wages. These predictions are supported by existing empirical work.
Volume (Year): 29 (2009)
Issue (Month): 3 ()
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- Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
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- Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
- Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
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