NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Entrepreneurship

Edward P. Lazear

NBER Working Paper No. 9109
Issued in August 2002
NBER Program(s):   CF   LS

The theory proposed below is that entrepreneurs are jacks-of-all-trades who may not excel in any one skill, but are competent in many. A coherent model of the choice to become an entrepreneur is presented. The primary implication is that individuals with balanced skills should be more likely than others to become entrepreneurs. The model provides implications for the proportion of entrepreneurs by occupation, by income and yields a number of predictions for the distribution of income by entrepreneurial status. Using a data set of Stanford alumni, the predictions are tested and found to hold. In particular, by far the most important determinant of entrepreneurship is having background in a large number of different roles. Further, income distribution predictions, e.g., that there are a disproportionate number of entrepreneurs in the upper tail of the distribution, are borne out.

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Document Object Identifier (DOI): 10.3386/w9109

Published: Lazear, Edward P. "Balanced Skills And Entrepreneurship," American Economic Review, 2004, v94(2,May), 208-211. also: Edward P. Lazear. "Entrepreneurship," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 649-680, October 2005.

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