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The Economic Returns to Entrepreneurship – Implications for Stimulating Entrepreneurship

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  • Astebro , Thomas B.

    ()

Abstract

Recent evidence on relative earnings from entrepreneurship versus wage work shows that after controlling for observable differences, entrepreneurs in most developed countries on average apparently earn less than employees. Does this mean that the choice of entrepreneurship should be encouraged or discouraged? The answer depends in part on whether one believes that entrepreneurs report their income truthfully or not. Adjusting for what is considered underreporting by entrepreneurs using observed differences in expenditures lifts entrepreneurial mean earnings by between 10 percent and 40 percent, reversing the above mentioned negative difference into a positive difference. If this adjustment result continues to hold in further analysis, there is no a priori reason to increase the support of entrepreneurs in developed countries, and one should discuss decreasing it.

Suggested Citation

  • Astebro , Thomas B., 2013. "The Economic Returns to Entrepreneurship – Implications for Stimulating Entrepreneurship," Les Cahiers de Recherche 977, HEC Paris.
  • Handle: RePEc:ebg:heccah:0977
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    More about this item

    Keywords

    Entrepreneurship; returns; income underreporting; public policy;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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