Smart and Illicit: Who Becomes an Entrepreneur and Does It Pay?
71 Pages Posted: 24 Aug 2013
Date Written: August 17, 2013
We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated — as teenagers — scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of “smarts” and “aggressive/illicit/risk-taking” tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.
Keywords: Entrepreneurship; Self-employment; Occupational choice, Compensation, Firm organization, Corporate finance, Cognitive and Noncognitive traits
JEL Classification: L26, J24, J3, G32
Suggested Citation: Suggested Citation