L4

Question 1

Bamoul - three types of entrerpreneurships

Answer 1

Productive = give social benefits, innovation and creates value
Unproductive = rent seeking, increase value through other peopel. Stagnation
Destructive = breaking down society. Organized crime

Question 2

Sumarize “Does entrepreneurship pay? An empirical analysis of the returns to self-employment.”(Hamilton)

Answer 2

Becoming an entrepreneur includes a lot of risk and therefor the return should be expected to be higher
But in reality entrepreneurs earn less than wage employees
= entrepreneur puzzle
Explained by non precuniary benefits

Question 3

Hamiltons four potential explainations for becoming entrepreneur despite lower wage

Answer 3

Non financial returns (your own boss, flexibility)
Investment and agency model (not pay for education, principal agent problem)
Job matching (low ability workers do not find job)
Superstar theory (can not substitute person and people are willing to pay for much more for the best)

Question 4

Critique Hamilton

Answer 4

Other explanations could be over optimism or not taking out wage cause of taxes
Curve is not for individual who goes in and out from employment
Wage could be the same but entrepreneurs just work more

Question 5

Sumarize Drug dealing and legitimate self-employment (Fairlie)

Answer 5

Correlation between being a drug dealer and later being self-employed shows that attitudes toward risk, entrepreneurial ability and preferences for independence are central to individual’s decision to become self-employment

Question 6

Critique Fairlie

Answer 6

If put in prison it is very difficult to find a job -it is not compared to finding a employment after drug dealing

Question 7

economic approach conclusion

Answer 7

If opportunity cost go up likelihood to become entrepreneur goes down
Non-pecuniary or pecuniary benefits go up likelihood go up to become entrepreneur