Wealth, Tastes, and Entrepreneurial Choice

Erik Hurst and Benjamin Pugsley

No 21644, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The non-pecuniary benefits of managing a small business are a first order consideration for many nascent entrepreneurs, yet the preference for business ownership is mostly ignored in models of entrepreneurship and occupational choice. In this paper, we study a population with varying entrepreneurial tastes and wealth in a simple general equilibrium model of occupational choice. This choice yields several important results: (1) entrepreneurship can be thought of as a normal good, generating wealth effects independent of financing constraints, (2) non-pecuniary entrepreneurs select into small scale firms, (3) subsidies designed to stimulate more business entry can have regressive distributional effects. Despite abstracting from other important considerations such as risk, financing constraints, and innovation, we show that non-pecuniary compensation is particularly relevant in discussions of small businesses.

JEL-codes: D21 D22 E24 L26 (search for similar items in EconPapers)
Date: 2015-10
Note: EFG PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Wealth, Tastes, and Entrepreneurial Choice , Erik G. Hurst, Benjamin W. Pugsley. in Measuring Entrepreneurial Businesses: Current Knowledge and Challenges , Haltiwanger, Hurst, Miranda, and Schoar. 2017

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Related works:
Chapter: Wealth, Tastes, and Entrepreneurial Choice (2016)
Working Paper: Wealth, Tastes, and Entrepreneurial Choice (2015)
Working Paper: Wealth, tastes, and entrepreneurial choice (2015)
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