Working Paper No. 805

Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework

Published: August 20, 2009Pages: 25Keywords: Entrepreneurship; Ability; Occupational Choice; Human Capital; Wage StructureJEL-codes: L26; I20; J24; J31

Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework Robin Douhan and Mirjam van Praag


We combine two empirical observations in a general equilibrium occupational choice model. The first is that entrepreneurs have more control than employees over the employment of and accruals from assets, such as human capital. The second observation is that entrepreneurs enjoy higher returns to human capital than employees. We present an intuitive model showing that more control (observation 1) may be an explanation for higher returns (observation 2); its main outcome is that returns to ability are higher in higher control environments. This provides a theoretical underpinning for the control-based explanation for higher returns to human capital for entrepreneurs.
 

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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