The entrepreneurial earnings puzzle: Mismeasurement or real?

Thomas Astebro and Jing Chen
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Jing Chen: Copenhagen Business School - CBS - Copenhagen Business School [Copenhagen]

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Abstract: A review of recent evidence on relative earnings from entrepreneurship versus wage work presents a puzzle: why do individuals become entrepreneurs when entrepreneurs on average apparently earn less than employees? After considering several potential explanations, we empirically analyze one: income underreporting by entrepreneurs. Using a nationwide panel survey representing U.S. households over 15 years, we estimate that entrepreneurs on average earn 4% less per year than employees. However, after correcting for income underreporting, the mean financial gain to entrepreneurship is positive and large, greater than 42%. However, we show that this estimate is built on some unpalatable model assumptions.

Keywords: Entrepreneurship; Returns; Income underreporting (search for similar items in EconPapers)
Date: 2014-01
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Citations: View citations in EconPapers (93)

Published in Journal of Business Venturing, 2014, 29 (1), pp.88-105. ⟨10.1016/j.jbusvent.2013.04.003⟩

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Journal Article: The entrepreneurial earnings puzzle: Mismeasurement or real? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00829057

DOI: 10.1016/j.jbusvent.2013.04.003

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