Political economy|Research shows that entrepreneurship is connected to income growth throughout the income distribution.
New research based on this, becoming an entrepreneur increases income at all income levels.
Based on the research, the founders of a new, unlisted joint-stock company earned on average about 20 percent more than those in paid employment ten years after starting their business, when income differences before becoming an entrepreneur are taken into account.
Parents’ entrepreneurial background and previous success in working life are connected to success as an entrepreneur, but entrepreneurs earned better on average than wage earners regardless of background or previous income level.
Large some of the entrepreneurs were already well-paid before becoming entrepreneurs.
As many as 17 percent of entrepreneurs belonged to the top five percent of the population and more than five percent belonged to the top one percent. People with high salaries who were successful in the labor market in the past also succeed particularly well as entrepreneurs.
Research however, shows that entrepreneurship is connected to income growth throughout the income distribution. In other words, becoming an entrepreneur improves income even for those with previously medium and low incomes. In addition, the probability of new entrepreneurs to end up in the group of the highest earning percent is significantly higher than that of a wage earner, regardless of the starting level of income.
“According to the research, successful entrepreneurs often already have a good income, but on average, entrepreneurship also increases income significantly, regardless of the initial income level. In addition, a large part of companies’ success is channeled to employees through wages,” says a researcher at the research institute Labore Toni Juuti in the bulletin.
Researchers Jarkko Harju From the University of Tampere, Toni Juuti and Tuomas Matikka The State Economic Research Center used extensive population-level data to examine the income development and success of Finnish entrepreneurs.
The study used extensive Finnish population-level register data on entrepreneurs and their companies from the 1990s to the 2020s. This material allowed individuals to be followed over time both before and after starting a business, providing a detailed picture of the success factors of entrepreneurship.
The results of the study are descriptive and do not show cause-and-effect relationships between the entrepreneurs’ background and income development or company success.
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