Smart and Illicit: Who Becomes an Entrepreneur and Does It Pay?

71 Pages Posted: 24 Aug 2013

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

Multiple version iconThere are 2 versions of this paper

Date Written: August 17, 2013

Abstract

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

Levine, Ross Eric and Rubinstein, Yona, Smart and Illicit: Who Becomes an Entrepreneur and Does It Pay? (August 17, 2013). Available at SSRN: https://ssrn.com/abstract=2314667 or http://dx.doi.org/10.2139/ssrn.2314667

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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