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The return-to-entrepreneurship puzzle

Author

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  • Hyytinen, Ari
  • Ilmakunnas, Pekka
  • Toivanen, Otto

Abstract

The returns to entrepreneurship are monetary and non-monetary. We offer new evidence on these returns using a large sample of male twins. Our within-twin analysis suggests that OLS estimates are downwards, and panel data estimates upwards biased. The within-twin estimates imply that entrepreneurs earn a negative earnings premium. Our within-twin analysis of non-monetary returns shows that entrepreneurs work longer hours and have greater responsibilities, but also have a greater control over their work.

Suggested Citation

  • Hyytinen, Ari & Ilmakunnas, Pekka & Toivanen, Otto, 2013. "The return-to-entrepreneurship puzzle," Labour Economics, Elsevier, vol. 20(C), pages 57-67.
  • Handle: RePEc:eee:labeco:v:20:y:2013:i:c:p:57-67 DOI: 10.1016/j.labeco.2012.11.002
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    Cited by:

    1. Dorner, Matthias & Fryges, Helmut & Schopen, Kathrin, 2015. "Wages in high-tech start-ups - do academic spin-offs pay a wage premium?," IAB Discussion Paper 201517, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Charles S. Bos & Paweł Janus & Siem Jan Koopman, 2012. "Spot Variance Path Estimation and Its Application to High-Frequency Jump Testing," Journal of Financial Econometrics, Society for Financial Econometrics, pages 354-389.
    3. Michael Wyrwich, 2015. "Entrepreneurship and the intergenerational transmission of values," Small Business Economics, Springer, pages 191-213.
    4. Böckerman, Petri & Vainiomäki, Jari, 2013. "Stature and life-time labor market outcomes: Accounting for unobserved differences," Labour Economics, Elsevier, pages 86-96.
    5. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, pages 251-272.
    6. Brenzel, Hanna & Gartner, Hermann & Schnabel, Claus, 2014. "Wage bargaining or wage posting? Evidence from the employers' side," Labour Economics, Elsevier, pages 41-48.
    7. Nyström, Kristina, 2015. "Pre- and post-entrepreneurship labor mobility of entrepreneurs and employees in entrepreneurial firms," Working Paper Series in Economics and Institutions of Innovation 420, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    8. Bublitz, Elisabeth & Nielsen, Kristian & Noseleit, Florian & Timmermans, Bram, 2015. "Entrepreneurship, human capital, and labor demand: A story of signaling and matching," HWWI Research Papers 166, Hamburg Institute of International Economics (HWWI).
    9. Viktor Slavtchev & Michael Wyrwich, 2017. "TV and Entrepreneurship," Jena Economic Research Papers 2017-007, Friedrich-Schiller-University Jena.
    10. Böckerman, Petri & Maczulskij, Terhi, 2016. "The Education-health Nexus: Fact and fiction," Social Science & Medicine, Elsevier, pages 112-116.
    11. Böckerman, Petri & Ilmakunnas, Pekka & Vainiomäki, Jari, 2014. "Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage," IZA Discussion Papers 8557, Institute for the Study of Labor (IZA).
    12. Mirjam Praag & Arjen van Witteloostuijn & Justin van der Sluis, 2013. "The higher returns to formal education for entrepreneurs versus employees," Small Business Economics, Springer, pages 375-396.
    13. Michael Wyrwich, 2013. "In the name of my parents: Entrepreneurship and the intergenerational transmission of values," Jena Economic Research Papers 2013-031, Friedrich-Schiller-University Jena.
    14. Hårsman, Björn & Mattsson, Lars-Göran & Hovsepyan, Vardan, 2017. "The income return to entrepreneurship – theoretical model and outcomes for Swedish regions," Working Paper Series in Economics and Institutions of Innovation 463, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    15. Dirk Czarnitzki & Julie Delanote, 2015. "R&D policies for young SMEs: input and output effects," Small Business Economics, Springer, vol. 45(3), pages 465-485, October.
    16. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, pages 88-105.
    17. Failla, Virgilio & Melillo, Francesca & Reichstein, Toke, 2017. "Entrepreneurship and employment stability — Job matching, labour market value, and personal commitment," Journal of Business Venturing, Elsevier, vol. 32(2), pages 162-177.
    18. van Praag, Mirjam C. & van Witteloostuijn, Arjen & van der Sluis, Justin, 2009. "Returns for Entrepreneurs vs. Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vs. Wage Employees," IZA Discussion Papers 4628, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Entrepreneurship; Earnings; Twin data; Monetary returns; Non-monetary returns; Selection;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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