Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?
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.
28 August 2013 Paper Number CEPDP1237
This CEP discussion paper is published under the centre's Growth programme.