IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpla/0406001.html
   My bibliography  Save this paper

What is Left to Residual Claimants? The Empirics of Income Reported by Entrepreneurs and Workers

Author

Listed:
  • Panu Poutvaara

    (Centre for Economic & Business Research, CESifo & IZA)

  • Juha Tuomala

    (Government Institute for Economic Research VATT)

Abstract

Using Finnish panel data, we study how entrepreneurs differ from workers in education and income dynamics. We find that workers have higher median income in all educational groups. Without additional controls, entrepreneurs have higher average income with all but undergraduate level of education. However, random effects and matching models suggest that entrepreneurs have lower incomes. We also analyze those who changed careers. Those with higher level of education are more likely to switch from entrepreneurship to workers, while education does not explain, in a statistically significant level, switching from being worker to entrepreneurship.

Suggested Citation

  • Panu Poutvaara & Juha Tuomala, 2004. "What is Left to Residual Claimants? The Empirics of Income Reported by Entrepreneurs and Workers," Labor and Demography 0406001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpla:0406001
    Note: Type of Document - pdf; pages: 23
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0406/0406001.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
    2. Aki Kangasharju & Sari Pekkala, 2001. "The Role of Education in Self-Employment Success," Studies in Economics 0116, School of Economics, University of Kent.
    3. Kyyrä, Tomi, 1999. "Post-Unemployment Wages and Economic Incentives to Exit from Unemployment," Research Reports 56, VATT Institute for Economic Research.
    4. 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.
    5. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    6. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthias Benz, "undated". "Entrepreneurship as a non-profit-seeking activity," IEW - Working Papers 243, Institute for Empirical Research in Economics - University of Zurich.
    2. Vesa Kanniainen & Mikko Leppämäki, 2009. "Union power, entrepreneurial risk, and entrepreneurship," Small Business Economics, Springer, vol. 33(3), pages 293-302, October.
    3. Maliranta, Mika & Nurmi, Satu, 2004. "Do Foreign Players Change the Nature of the Game Among Local Entrepreneurs?," Discussion Papers 942, The Research Institute of the Finnish Economy.
    4. Ari Hyytinen & Olli‐Pekka Ruuskanen, 2007. "Time Use of the Self‐Employed," Kyklos, Wiley Blackwell, vol. 60(1), pages 105-122, February.
    5. Maliranta, Mika & Nurmi, Satu, 2004. "Analyzing Entrepreneurship with the Finnish Linked Employer-Employee Data (FLEED).Matching and qualitative properties of the data," Discussion Papers 920, The Research Institute of the Finnish Economy.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Poschke, Markus, 2013. "Who becomes an entrepreneur? Labor market prospects and occupational choice," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 693-710.
    2. Ross Levine & Yona Rubinstein, 2017. "Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 963-1018.
    3. Boyan Jovanovic, 2019. "The entrepreneurship premium," Small Business Economics, Springer, vol. 53(3), pages 555-568, October.
    4. Joanna Georgios Alexopoulos & Anne Villamil, 2014. "The Effects Of Frictions In The Labormarket On Entrepreneurship And Economic Development," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 045, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Becker, Sascha & Hvide, Hans V, 2013. "Do entrepreneurs matter?," CAGE Online Working Paper Series 109, Competitive Advantage in the Global Economy (CAGE).
    6. Opromolla, Luca David & Dell’Era, Michele & Santos-Pinto, Luis, 2018. "A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability," CEPR Discussion Papers 13225, C.E.P.R. Discussion Papers.
    7. Clemens, Christiane & Heinemann, Maik, 2010. "On entrepreneurial risk-taking and the macroeconomic effects of financial constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1610-1626, September.
    8. Maik Heinemann & Christiane Clemens, 2007. "Credit Constraints, Entrepreneurial Activity, and Occupational Choice under Risk," 2007 Meeting Papers 416, Society for Economic Dynamics.
    9. Bernstein, Shai & Colonnelli, Emanuele & Malacrino, Davide & McQuade, Tim, 2022. "Who creates new firms when local opportunities arise?," Journal of Financial Economics, Elsevier, vol. 143(1), pages 107-130.
    10. Fritsch, Michael & Sorgner, Alina & Wyrwich, Michael, 2019. "Self-employment and well-being across institutional contexts," Journal of Business Venturing, Elsevier, vol. 34(6).
    11. Johan Hombert & Antoinette Schoar & David Sraer & David Thesmar, 2020. "Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France," Journal of Finance, American Finance Association, vol. 75(3), pages 1247-1285, June.
    12. Nikolaj Malchow-Møller & James Markusen & Jan Skaksen, 2010. "Labour market institutions, learning and self-employment," Small Business Economics, Springer, vol. 35(1), pages 35-52, July.
    13. Galina Vereshchagina & Hugo A. Hopenhayn, 2009. "Risk Taking by Entrepreneurs," American Economic Review, American Economic Association, vol. 99(5), pages 1808-1830, December.
    14. Drautzburg, Thorsten, 2019. "Entrepreneurial tail risk: Implications for employment dynamics," Journal of Monetary Economics, Elsevier, vol. 104(C), pages 85-100.
    15. Kuechle, Graciela, 2011. "Persistence and heterogeneity in entrepreneurship: An evolutionary game theoretic analysis," Journal of Business Venturing, Elsevier, vol. 26(4), pages 458-471, July.
    16. Deepak Hegde & Justin Tumlinson, 2021. "Information frictions and entrepreneurship," Strategic Management Journal, Wiley Blackwell, vol. 42(3), pages 491-528, March.
    17. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2015. "Entrepreneurship and Financial Frictions: A Macrodevelopment Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 409-436, August.
    18. Pástor, Lˇuboš & Veronesi, Pietro, 2016. "Income inequality and asset prices under redistributive taxation," Journal of Monetary Economics, Elsevier, vol. 81(C), pages 1-20.
    19. Hvide, Hans K. & Panos, Georgios A., 2014. "Risk tolerance and entrepreneurship," Journal of Financial Economics, Elsevier, vol. 111(1), pages 200-223.
    20. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Entrepreneurs; Workers; Finnish labor market; Education;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I2 - Health, Education, and Welfare - - Education

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0406001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.