Is it profitable to work as an entrepreneur? Evaluation of differences in the incomes of Russian entrepreneurs and employees

Abstract

This paper, based on the data of sample observation of population incomes and participation in social programs for the period from 2014 to 2018 prepared by the Federal State Statistics Service, evaluates the differences in the incomes of employees and entrepreneurs, the latter fall into ownaccount workers and employers. In this study the methods of ordinary least squares and quantile regression are employed. The results show that in Russia entrepreneurs’ median and average earnings are higher than employees’ ones. The highest positive differences are in the incomes of employers who earn more than own-account workers and employees respectively. Also, entrepreneurs earn more than employees during the period of economic growth as well as recession. It indicates that the positive income difference between entrepreneurs and employees is kept during economic slowdowns. Th is finding distinguishes Russia from the countries with high income per capita and a larger contribution of small and medium-sized businesses to the gross domestic product, such as the USA, Great Britain, Germany, Finland, where entrepreneurs often earn less than employees. Thus, the monetary reward might be a primary reason for persons to opt for entrepreneurship in Russia than in high-income economies.