Does entrepreneurship really reduce income inequality?

Yosef Bonaparte and Naman Kumar

Finance Research Letters, 2024, vol. 69, issue PB

Abstract: This paper examines whether entrepreneurial activities reduce social inequality. Using data from 62 countries, we find that countries with higher levels of entrepreneurship have lower income inequality. We also find that various cultural factors including gender wage gap and diversity indicators influence country-level entrepreneurship. When we use gender wage gap as an instrument to account for potential endogeneity in the decision to become an entrepreneur, the entrepreneurship-inequality relation becomes stronger. In economic terms, one standard deviation in entrepreneurship reduces income inequality by 6–11 %, relative to the mean. Together, these findings suggest that entrepreneurial activities can be an effective strategy for mitigating income disparities and promoting economic inclusivity.

Keywords: Entrepreneurship; Income inequality; Gini index; Gender wage gap; Instrumental variable (search for similar items in EconPapers)
JEL-codes: D31 G50 L26 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012637

DOI: 10.1016/j.frl.2024.106234

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