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Author: Tumlinson, Justin
Resulting in 1 citation.
1. Hegde, Deepak
Tumlinson, Justin
Asymmetric Information and Entrepreneurship
Working Paper, Social Science Research Network, October 2018.
Cohort(s): NLSY79
Publisher: Elsevier
Keyword(s): Earnings; Educational Attainment; Entrepreneurship; NCDS - National Child Development Study (British)

Why do individuals become entrepreneurs? We argue that information asymmetries and the quest to maximize pecuniary returns produce entrepreneurs. In our model, individuals signal their hidden ability to employers (e.g., via educational qualifications). However, signals are imperfect and individuals with greater ability than their signals convey to employers become entrepreneurs. Empirical analysis of two longitudinal samples of U.S. and U.K. residents supports the model's predictions that (i) entrepreneurs have higher ability than employees with comparable signals, (ii) employees have better signals than equally able entrepreneurs, and (iii) entrepreneurs' earnings are higher and exhibit greater variance than employees' with similar signals.
Bibliography Citation
Hegde, Deepak and Justin Tumlinson. "Asymmetric Information and Entrepreneurship." Working Paper, Social Science Research Network, October 2018.