Income Mobility of Owners of Small Businesses when Boundaries between Occupations are Vague
Ownership of small businesses can facilitate upward mobility through the income hierarchy and help individuals maintain a place at the higher end of the income distribution hierarchy. This paper compares the positional stability of owners of small businesses with that of wage earners, arguing that describing the relative position of different occupations faces definitional challenges. For instance, the Norwegian dual income tax system encourages owners of small businesses to establish widely held firms, with themselves as employees, because it reduces the tax burden and increases post-tax income. Descriptions of income distribution mobility of different occupations are therefore in danger of being misleading if such occupational measurement problems are not taken into account. I discuss in this paper the income mobility of owners of small firms in Norway 1993–2003 by estimating income transition models for different definitions of occupational status. Business ownership facilitates upward mobility and helps owners maintain a place at the top of the income distribution scale, and wider definitions of what counts as a small business owner enhance these correlations. However, as the paper shows, business owners are more mobile than wage earners and therefore overrepresented at the lower and higher ends of the income distribution ranking, irrespective of definition.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Formby, John P. & Smith, W. James & Zheng, Buhong, 2004. "Mobility measurement, transition matrices and statistical inference," Journal of Econometrics, Elsevier, vol. 120(1), pages 181-205, May.
- Stewart, M.B. & Swaffield, J.K., 1997.
"Low Pay Dynamics and Transition Probabilities,"
The Warwick Economics Research Paper Series (TWERPS)
495, University of Warwick, Department of Economics.
- Lorenzo Cappellari & Stephen P. Jenkins, 2002.
"Modelling Low Income Transitions,"
Discussion Papers of DIW Berlin
288, DIW Berlin, German Institute for Economic Research.
- Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling low income transitions," ISER Working Paper Series 2002-08, Institute for Social and Economic Research.
- Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
- Lorenzo Cappellari & Stephen P. Jemkins, 2002. "Who Stays Poor? Who Becomes Poor? Evidence from the British Household Panel Survey," Economic Journal, Royal Economic Society, vol. 112(478), pages C60-C67, March.
- 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.
- Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-24, September.
- Plesko, George A., 1995. "'Gimme Shelter?' Closely Held Corporations Since Tax Reform," National Tax Journal, National Tax Association, vol. 48(3), pages 409-16, September.
- Douglas Holtz-Eakin & Harvey S. Rosen & Robert Weathers, 2000.
"Horatio Alger Meets the Mobility Tables,"
NBER Working Papers
7619, National Bureau of Economic Research, Inc.
- Parker, Simon C, 1999. "The Inequality of Employment and Self-Employment Incomes: A Decomposition Analysis for the U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(2), pages 263-74, June.
- Robert Fairlie, 2005. "Entrepreneurship and Earnings among Young Adults from Disadvantaged Families," Small Business Economics, Springer, vol. 25(3), pages 223-236, October.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2633. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.