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Wealth, Tastes, and Entrepreneurial Choice

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Wealth, Tastes, and Entrepreneurial Choice

Federal Reserve Bank of New York,

5 min read
5 take-aways
Audio & text

What's inside?

Is it worthwhile for government to subsidize small businesses?

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Small-business owners tend to earn less than they would as full-time employees, but most of them prefer entrepreneurship for its nonmonetary rewards and thus don’t mind taking a pay cut to engage in such ventures. This original research by macroeconomists Erik G. Hurst and Benjamin W. Pugsley explores this mind-set and its implications for policy makers looking to stimulate employment and innovation through small-business subsidies. While informative, the report is a heavily technical read intended for a professional audience. Nonetheless, getAbstract recommends it to government policy makers and economists, as well as to entrepreneurs.

Summary

Small businesses are a staple of the US economy. Small-business ownership holds a romantic appeal for many American entrepreneurs, for whom the desire to be free and to control their own destinies ranks higher than the wish to make more money. In a 2011 study of US small-business owners, as many as 50% of respondents cited nonmonetary gains among the main reasons for setting up their entrepreneurial ventures.

Small businesses in America tend to be in the skilled trades, such as plumbing and electrical work, and in professions such as dentistry and accounting. Running...

About the Authors

Erik G. Hurst is an economics professor at the University of Chicago, and Benjamin W. Pugsley is an economist at the Federal Reserve Bank of New York.


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