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Smart and illicit: who becomes an entrepreneur and do they earn more?

Levine, Ross and Rubinstein, Yona (2017) Smart and illicit: who becomes an entrepreneur and do they earn more? Quarterly Journal of Economics, 132 (2). pp. 963-1018. ISSN 0033-5533

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Identification Number: 10.1093/qje/qjw044

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. People who become incorporated business owners tend to be more educated and— as teenagers—score higher on learning aptitude tests, exhibit greater self-esteem, and engage in more illicit activities than others. The combination of “smart” and “illicit” tendencies as youths accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. Individuals tend to experience a material increase in earnings when becoming entrepreneurs, and this increase occurs at each decile of the distribution.

Item Type: Article
Official URL: https://academic.oup.com/qje
Additional Information: © 2016 The Authors
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Sets: Departments > Management
Date Deposited: 06 Dec 2017 12:26
Last Modified: 20 Jun 2020 02:38
URI: http://eprints.lse.ac.uk/id/eprint/85971

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