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Exploiting Income Statistics for Entrepreneurschip Research

Exploiting Income Statistics for Entrepreneurschip Research. II Workshop on Entrepreneurship Statistics Huelva, Spain 17 and 18 november 2008. EIM and Entrepreneurship Research. Social-economic policy research and consultancy

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Exploiting Income Statistics for Entrepreneurschip Research

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  1. Exploiting Income Statistics for Entrepreneurschip Research II Workshop on Entrepreneurship Statistics Huelva, Spain 17 and 18 november 2008

  2. EIM and Entrepreneurship Research • Social-economic policy research and consultancy • Research Program on SME’s and Entrepreneurship, financed by Dutch Ministry of Economic Affairs • Collection and processing of survey data and statistics, scientific analysis, publication and distribution of research findings • Major themes: nascent entrepreneurship, business start-ups, high growth enterprises, firm size distribution, innovation, internationalization, job creation and human resources management in SME’s

  3. Incomes of Entrepreneurs • Measuring incomes of self-employed and owner-managers: a long tradition • Detailed individual income data useful for policy research: • Modelling and forecasting • Ex-ante effects of (fiscal) policy • Ex-post evaluation of (fiscal) policy measures • Income characteristics of entrepreneurs and long-term and recent developments • Recent activities: towards a Monitor Incomes of Entrepreneurs

  4. IncomeStatistics • Income statistics operated by Statistics Netherlands • Main source: citizen’s tax returns to Dutch Tax Administration • Panel data: individual respondents are followed over time annually (representative sample) • Detailed individual data: more than 100 income components measured for nearly 250,000 taxpayers (14.000 with business activities as self-employed) • Annual consistent data from 1989 until approximately three years in the past

  5. Measuring Incomes of Entrepreneurs • Income under-reporting by the self-employed • Relatively high non-response rates to survey income questions by self-employed • Tails of income distribution • Differences between self-employed and owner-managers incorporated businesses (OMIB’s) • Advantages of Income Statistics compared to surveys

  6. Measuring Income Differences between Entrepreneurs and Employees • Multiple functions of income for self-employed • Self-employment incomes include returns to capital as well as returns to labour • Social security arrangements and employee benefits that are unavailable in self-employment • Differences in fiscal treatment of self-employed and paid employees • Descriptive analysis: various income definitions

  7. Some Definitions • Explicit distinction between self-employed individuals and owner-managers of incorporated businesses • Definitions of self-employed: • Taxpayer with nonzero profits on tax return. in 2004 840,000 self-employed individuals • Taxpayer with self-employment deduction on tax return; criterium: more than 1,225 hours carrying a business. In 2004 535,000 self-employed individuals • Definition of owner-manager of incorporated business: taxpayer with wages manager incorporated business, without social security contributions. In 2004 135,000 owner/managers of incorporated businesses

  8. Net Disposable Income of Entrepreneurs, 1990-2004

  9. Ratio Disposable Income Self-employed/Employees, 1990-2004

  10. Background of Developments • Long term trends robust to other (income) definitions • Decline in relative income position of self-employed also observed in other countries • Great Britain (Robson, 1997) • United States (Aronson, 1991) • Australia (Covinck, 1983) • Rise of entrepreneurship in The Netherlands • Increase in heterogeneity of population entrepreneurs • Decrease in ‘quality’ of entrepreneurs?

  11. Income Components Entrepreneurs and Employees, 2004

  12. Other Interesting Descriptives • Poverty rate of self-employed 16% (10% overall), 6% on a permanent basis (2004) • Income of entrepreneurs is positively related with age • Large relative income difference between male and female entrepreneurs in favour of males (40% for self-employed in 2004) • Non-western ethnic entrepreneurs earn on average 20% less than native entrepreneurs

  13. Measuring Entrepreneurship with Income Statistics • Measuring mobility between occupations • from paid employment to self-employment • from social benefit to self-employment • from self-employment to owner-manager incorporated business

  14. Intriguing Research Questions • How large is the income differential between self-employment and employment, and which factors explain these relative income differences? • Why is average income of self-employed individuals declining in the long run? • Why are (structural) poverty rates relatively high, while most of the entrepreneurs involved are able to continue their businesses in the long run? What are the social effects of this? • How large is the intensity of mobility between different occupations, and how does this affect income positions?

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