TY  - JOUR
AU  - Hurst, Erik G
AU  - Pugsley, Benjamin W
TI  - Wealth, Tastes, and Entrepreneurial Choice
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 21644
PY  - 2015
Y2  - October 2015
DO  - 10.3386/w21644
UR  - http://www.nber.org/papers/w21644
L1  - http://www.nber.org/papers/w21644.pdf
N1  - Author contact info:
Erik Hurst
Booth School of Business
University of Chicago
Harper Center
Chicago, IL  60637
Tel: 773/834-4073
Fax: 773/702-0458
E-Mail: erik.hurst@chicagobooth.edu

Benjamin Pugsley
University of Notre Dame
Department of Economics
Notre Dame, IN 46556
E-Mail: bpugsley@nd.edu
M1  - published as Erik G. Hurst, Benjamin W. Pugsley. "Wealth, Tastes, and Entrepreneurial Choice," in John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar, editors, "Measuring Entrepreneurial Businesses: Current Knowledge and Challenges" University of Chicago Press (2017)

M3  - presented at "CRIW: Measuring Entrepreneurial Businesses", December 16-17, 2014
AB  - The non-pecuniary benefits of managing a small business are a first order consideration for many nascent entrepreneurs, yet the preference for business ownership is mostly ignored in models of entrepreneurship and occupational choice. In this paper, we study a population with varying entrepreneurial tastes and wealth in a simple general equilibrium model of occupational choice. This choice yields several important results:  (1) entrepreneurship can be thought of as a normal good, generating wealth effects independent of financing constraints, (2) non-pecuniary entrepreneurs select into small scale firms, (3) subsidies designed to stimulate more business entry can have regressive distributional effects. Despite abstracting from other important considerations such as risk, financing constraints, and innovation, we show that non-pecuniary compensation is particularly relevant in discussions of small businesses.
ER  -