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

73 Pages Posted: 10 Aug 2013 Last revised: 8 Oct 2014

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Yona Rubinstein

London School of Economics & Political Science (LSE) - Department of Management

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Date Written: August 2013

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. The incorporated selfemployed have distinct cognitive and noncognitive traits. Besides tending to be white, male, and come from higher-income families, the incorporated—as teenagers—typically scored higher on learning aptitude tests, had greater self-esteem, and engaged in more disruptive, illicit activities. The combination of "smart" and "illicit" tendencies as youths accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to past research, we find that entrepreneurs earn more per hour and work more hours than their salaried and unincorporated counterparts.

Suggested Citation

Levine, Ross Eric and Rubinstein, Yona, Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More? (August 2013). NBER Working Paper No. w19276. Available at SSRN: https://ssrn.com/abstract=2308245

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yona Rubinstein

London School of Economics & Political Science (LSE) - Department of Management ( email )

United Kingdom

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