Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More?

Ross Levine () and Yona Rubinstein

The Quarterly Journal of Economics, 2017, vol. 132, issue 2, 963-1018

Abstract: We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. We show that the incorporated self-employed and their businesses engage in activities that demand comparatively strong nonroutine cognitive abilities, while the unincorporated and their firms perform tasks demanding relatively strong manual skills. People who become incorporated business owners tend to be more educated and—as teenagers—score higher on learning aptitude tests, exhibit greater self-esteem, and engage in more illicit activities than others. The combination of “smart” and “illicit” tendencies as youths accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. Individuals tend to experience a material increase in earnings when becoming entrepreneurs, and this increase occurs at each decile of the distribution.

JEL-codes: G32 J24 J3 L26 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (257)

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Related works:
Working Paper: Smart and illicit: who becomes an entrepreneur and do they earn more? (2017)
Working Paper: Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More? (2013)
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