Working Paper No. 1128

The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship

Published: June 16, 2016Pages: 21Keywords: Entrepreneurship; Economic rent; Entrepreneurial rent; Innovation; ImitationJEL-codes: D51; J30; L26; O31

The Entrepreneurial Rent: The Value of and Compensation for Entrepreneurship Magnus Henrekson and Mikael Stenkula

The surplus that is created in a successful entrepreneurial venture is much higher than the profit corresponding to the risk-adjusted market rate of return. The part of the surplus that exceeds this level may be denoted “entrepreneurial rent.” Such rents normally disappear in the long run but so-called isolating mechanisms ensure that these rents persist in the short or medium run.

Entrepreneurial rents arise when successful entrepreneurship is exercised and entrepreneurial firms create and successfully commercialize something new and unique. The presence of and search for entrepreneurial rents is a prerequisite for the innovations and structural change required to generate economic growth. High ex post compensation for successful entrepreneurship cannot be taxed harshly without affecting entrepreneurs’ willingness to supply effort.


Magnus Henrekson


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Mikael Stenkula


Ph: +46 8 665 4530
Mob: +46 73 844 18 78

Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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