HEC Paris2014-08-11 8:46 PM

The entrepreneurial earnings puzzle: Mismeasurement or real?

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.

 

Author

Thomas ASTEBRO, J. CHEN

 

Departments

Strategy & Business Policy, GREGHEC (CNRS)

 

Journal Information

Journal of Business Venturing, January 2014, vol. 29, pp.88-105

 

Full Article

http://www.sciencedirect.com/science/article/pii/S0883902613000372

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HEC Paris

Founded in 1881 by the Paris Chamber of Commerce and Industry, HEC Paris specializes in education and research in management sciences. As a leading academic institution in Europe and worldwide, HEC Paris offers a complete and unique range of education programs for students and leaders.

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