Do Entrepreneurs Really Earn Less?

Emergency-aid for self-employed in the Covid-19 pandemic: A flash in the pan?

“…In Germany, around 4.2 million individuals (about 10% of the working population) are self-employed, either without any employees (so called solo self-employed, see e.g. de Vries et al 2019) and sometimes with hourly earnings around the minimum wage (Sorgner et al 2017) or with employees, often running micro businesses with fewer than 10 employees (hereafter "employers"). This diverse population of self-employed, which has grown strongly since the 1990s, is an increasingly important part of the German economy, from both labor market and economic perspectives.…”

Entrepreneurship as the safe option: Evidence from India

“…Much of the recent literature on the returns to entrepreneurship, however, has focused on differentiating the returns across subgroups of the self-employed. The consistent finding has been that highly-educated entrepreneurs and those employing others earn premiums as entrepreneurs, even though the average entrepreneur experiences an earnings penalty (e.g., Levine and Rubinstein, 2017;Sorgner et al, 2017).…”

“…Most notably, those engaged in building organizations -as opposed to simply being self-employed -tend to earn more (Levine and Rubinstein, 2017;Sarada, 2020;Sorgner et al, 2017). Those with high levels of human capital also enjoy higher returns to becoming an entrepreneur (Sorgner et al, 2017;Van Praag, van Witteloostuijn, and van der Sluis, 2013). These studies therefore suggest that the negative average returns to entrepreneurship may stem from a large fraction of individuals entering entrepreneurship not for the financial gains but for the non-pecuniary rewards.…”

“…Early research on the returns to entrepreneurship in the United States identified two important stylized facts: (i) the median entrepreneur earns less than his or her employed counterparts, and (ii) entrepreneurs also bear more financial risk than employees (Evans and Leighton, 1989;Hamilton, 2000;Moskowitz and Vissing-Jørgensen, 2002). Analyses from other countries, such as Finland (Hyytinen, Ilmakunnas, and Toivanen, 2013), Germany (Sorgner, Fritsch, and Kritikos, 2017) and Korea (Åstebro, Chen, and Thompson, 2011), have found similar patterns: negative returns to entrepreneurship at the mean and median but with fatter right-hand tails. 1 In other words, entrepreneurs earn less on average but a select few earn substantially more than those in paid employment (Hamilton, 2000).…”

“…One set of papers, for example, has demonstrated that certain subgroups of entrepreneurs enjoy positive returns. Most notably, those engaged in building organizations -as opposed to simply being self-employed -tend to earn more (Levine and Rubinstein, 2017;Sarada, 2020;Sorgner et al, 2017). Those with high levels of human capital also enjoy higher returns to becoming an entrepreneur (Sorgner et al, 2017;Van Praag, van Witteloostuijn, and van der Sluis, 2013).…”