nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒12‒03
five papers chosen by
Marcus Dejardin
Université de Namur

  1. A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability By Michele Dell'Era; Luca David Opromolla; Luís Santos-Pinto
  2. Spinoffs, parents, and institutions: Evidence from the Italian motorcycle industry By Andrea Morrison
  3. Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector By Philipp Lergetporer; Jens Ruhose; Lisa Simon
  4. How do Small Firms Respond to Tax Schedule Discontinuities? Evidence from South African Tax Registers By Wian Boonzaaier; Jarkko Harju; Tuomas Matikka; Jukka Pirttilä
  5. Frank H. Knight on Uncertainty and Profit Manager versus Entrepreneur By Yasuhiro Sakai

  1. By: Michele Dell'Era; Luca David Opromolla; Luís Santos-Pinto
    Abstract: This paper studies the impact of optimism on occupational choice using a general equilibrium framework. The model shows that optimism has four main qualitative effects: it leads to a misallocation of talent, drives up input prices, raises the number of entrepreneurs, and makes entrepreneurs worse off. We calibrate the model to match U.S. manufacturing data. This allows us to make quantitative predictions regarding the impact of optimism on occupational choice, input prices, the returns to entrepreneurship, and output. The calibration shows that optimism can explain the empirical puzzle of the low mean returns to entrepreneurship compared to average wages.
    Keywords: general equilibrium, entrepreneurship, optimism
    JEL: D50 H21 J24 L26
    Date: 2018
  2. By: Andrea Morrison
    Abstract: In this paper we study the impact of spinoff generation events on the performance of parent organizations. Using data from the Italian motorcycle industry (1893-1993), we find that parents have higher survival chances after a spinoff generation event, confirming results from previous studies about other manufacturing industries. We also show that these enhanced survival patterns differ across time and space, and we link these effects to institutional differences: spinoff generation did not determine any survival advantage for parent firms in the Fascist era and in the Turin cluster, while it had an additional positive effect in the Motorvalley cluster. The paper contributes to the literature on spinoff generation and employee mobility and adds to the debate on the role of institutions in evolutionary economic geography, by showing the importance of contextual factors for the performance of parent firms.
    Keywords: Spinoffs, Employee entrepreneurship, Parents, Institutions, Evolutionary economic geography
    JEL: B52 L26 O18 R11
    Date: 2018–11
  3. By: Philipp Lergetporer; Jens Ruhose; Lisa Simon
    Abstract: We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.
    Keywords: deregulation, entry barriers, self-employment, labor market outcomes, entropy balancing, matched difference-in-differences
    JEL: J31 J24 L11
    Date: 2018
  4. By: Wian Boonzaaier; Jarkko Harju; Tuomas Matikka; Jukka Pirttilä
    Abstract: We study the responsiveness of small and medium-sized firms to a small-business corporate income tax schedule using population-wide administrative data from South Africa. We find sizeable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp, and reacts immediately to changes in the location of the kink points. These observations suggest that a sizeable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked to underreporting of sales and legal tax-planning activities.
    Keywords: corporate taxation, small firms, emerging economies, bunching
    JEL: H21 H25 H32 O12
    Date: 2018
  5. By: Yasuhiro Sakai (Faculty of Economics, Shiga University)
    Abstract: This chapter aims to carefully discuss how Frank H. Knight, the "Grand Old @Man" of Chicago, dealt with uncertainty and profit, with special reference to manager versus entrepreneur. Frankly speaking, Knight was a sort of man in paradox, having a dualistic view and adopting an eclectic approach. In order to shed a new light on his life and work, we first argue that there possibly exist some traces of the great Knight in the words and deeds of Martin Bronfenbrenner, once one of Knight's students at Chicago. Then we focus on the distinction between risk and uncertainty. According to Knight, non-measurable uncertainty must radically be different from measurable risk: only uncertainty, but not risk, enables the entrepreneur to acquire true profit as its reward. In contrast to the manager who are doing just routine jobs every day, the entrepreneur dares to engage in new venturous activities, thus playing the central figure of the capitalist system. We live in the new age of uncertainty. The second Knight is urgently needed.
    Keywords: Frank H. Knight, Martin Bronfenbrenner, risk, uncertainty, manager, entrepreneur, profit, capitalist system
    Date: 2018–10

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