This literature overview examines five studies investigating the monetary returns to entrepreneurship compared to wage employment. It starts with a summary of findings up to 2007 by observing a meta study and follows by analyzing four recent empirical analyses. These apply various approaches to discover the link between entrepreneurship and individual remuneration: investigating returns to ability, comparing twins, using a broad definition of entrepreneurship, and correcting for underreporting. The results do not indicate a clear direction. Negative, positive and similar returns for entrepreneurs compared to employed individuals are found. However, if one assumes the problems of a restrictive definition of entrepreneurship and of income underreporting to be generally relevant, higher earnings of entrepreneurs seem plausible.
Table of Contents
- 1 Introduction
- 2 State of Affairs in 2007
- 3 Negative Returns
- 3.1 Returns to Ability
- 3.2 Within-twin-analysis
- 4 Positive Returns
- 4.1 Limited Liability Company Entrepreneurs
- 4.2 Income Underreporting
- 5 Comparison of Results
Objectives and Key Themes
This literature overview aims to analyze the financial benefits of entrepreneurship compared to traditional employment. It achieves this by reviewing existing studies, specifically focusing on the methodologies used and the inconsistencies in findings regarding the relationship between entrepreneurship and remuneration.
- Monetary returns to entrepreneurship versus wage employment
- Methodological approaches to studying the entrepreneur-employee earnings gap
- The impact of ability and other individual characteristics on entrepreneurial success
- The role of income underreporting in influencing study results
- The limitations of defining entrepreneurship
Chapter Summaries
1 Introduction: This introductory chapter sets the stage for the literature review, outlining the central research question concerning the financial rewards of entrepreneurship relative to salaried employment. It briefly previews the methodology employed, which involves analyzing several studies that have tackled this complex issue, using diverse approaches.
2 State of Affairs in 2007: This chapter summarizes the findings of research up to 2007 regarding the financial comparison between entrepreneurs and employees. It forms a crucial baseline for the analysis of more recent studies presented later in the paper. By establishing the prevailing understanding of the topic at that time, the chapter allows for a clear assessment of how subsequent research has built upon, challenged, or refined these earlier conclusions.
3 Negative Returns: This chapter delves into studies that report negative or equal financial returns for entrepreneurs compared to employees. It specifically examines two approaches: analyzing returns based on individual ability and employing within-twin analyses to control for unobserved characteristics. The chapter highlights the complexities and potential biases inherent in these methodologies, and how they may contribute to the observed findings. The discussion emphasizes the need to carefully consider these potential biases when interpreting the results.
4 Positive Returns: This chapter presents research suggesting that entrepreneurs actually earn more than their employed counterparts. It explores this perspective through two lenses: focusing on limited liability company (LLC) entrepreneurs and accounting for income underreporting. The chapter carefully analyzes how these approaches address some of the limitations and biases inherent in previous studies, providing a counterpoint to the findings of Chapter 3. It examines the significance of these findings in terms of methodological improvements and their implications for understanding the relationship between entrepreneurship and remuneration.
5 Comparison of Results: This chapter synthesizes the findings of the preceding chapters, comparing and contrasting the results from studies showing both positive and negative (or neutral) financial returns for entrepreneurs. It critically evaluates the various methodologies used and discusses the potential sources of discrepancies among the findings. The chapter also suggests areas for future research to improve the accuracy and reliability of comparative studies in this field.
Keywords
Entrepreneurship, individual remuneration, wage employment, earnings, returns to ability, twin studies, income underreporting, limited liability company, methodological comparisons, empirical analysis.
Frequently Asked Questions: A Literature Overview on the Financial Rewards of Entrepreneurship
What is the main topic of this literature overview?
This literature overview analyzes the financial benefits of entrepreneurship compared to traditional employment. It examines existing studies, focusing on their methodologies and inconsistencies in findings regarding the relationship between entrepreneurship and remuneration.
What are the key themes explored in this overview?
The key themes include monetary returns to entrepreneurship versus wage employment; methodological approaches to studying the entrepreneur-employee earnings gap; the impact of ability and individual characteristics on entrepreneurial success; the role of income underreporting in influencing study results; and the limitations of defining entrepreneurship.
What is the structure of the overview?
The overview is structured into five chapters: Chapter 1 provides an introduction; Chapter 2 summarizes research up to 2007; Chapter 3 explores studies reporting negative or equal financial returns for entrepreneurs; Chapter 4 presents research suggesting positive returns; and Chapter 5 compares and contrasts the findings of the previous chapters.
What are the key findings of Chapter 3 (Negative Returns)?
Chapter 3 examines studies showing negative or equal financial returns for entrepreneurs compared to employees. It analyzes two approaches: analyzing returns based on individual ability and using within-twin analyses. The chapter highlights the complexities and potential biases in these methodologies.
What are the key findings of Chapter 4 (Positive Returns)?
Chapter 4 presents research suggesting entrepreneurs earn more than employees. It focuses on limited liability company (LLC) entrepreneurs and accounts for income underreporting. The chapter analyzes how these approaches address limitations and biases in previous studies.
How does the overview address methodological inconsistencies?
The overview critically evaluates various methodologies used in different studies, comparing and contrasting results showing both positive and negative financial returns for entrepreneurs. It discusses potential sources of discrepancies and suggests areas for future research to improve the accuracy and reliability of comparative studies.
What are the key methodologies discussed in this overview?
The overview discusses several methodologies, including analyzing returns based on individual ability, within-twin analyses to control for unobserved characteristics, focusing on limited liability company (LLC) entrepreneurs, and accounting for income underreporting.
What are the limitations of the studies reviewed?
The overview highlights the limitations and potential biases inherent in different methodologies, such as the challenges of accurately measuring entrepreneurial income due to income underreporting and the difficulties of controlling for unobserved individual characteristics that might influence entrepreneurial success.
What are the keywords associated with this literature overview?
Keywords include: Entrepreneurship, individual remuneration, wage employment, earnings, returns to ability, twin studies, income underreporting, limited liability company, methodological comparisons, empirical analysis.
What is the overall conclusion of this literature overview?
The overview synthesizes findings from studies showing both positive and negative financial returns for entrepreneurs, highlighting the methodological challenges and inconsistencies in the existing research. It emphasizes the need for more robust and reliable methodologies to accurately assess the financial rewards of entrepreneurship.
- Quote paper
- Justus Kirchhoff (Author), 2016, Entrepreneurship and individual remuneration. Does it pay to be an entrepreneur?, Munich, GRIN Verlag, https://www.grin.com/document/371176
