When less is more: Distinguishing between entrepreneurial choice and performance

This paper uses NCDS data on individual characteristics to distinguish dete rminants of entrepreneurial choice, income and job generation. A new model of utility from self-employment shows that relaxing liquidity constraints c ould inhibit performance. Empirically, we find that a range of inheritance enhances the performance of the self-employed and increases self-employment ; while higher education also increases self-employment income and job crea tion, but reduces the probability of self-employment. Combining these choic e and performance effects, we find that education has a positive net effect on job creation, as does inheritance up to a certain threshold.