Income Security Policy Paper No. 19

Horatio Alger Meets the Mobility Tables

Douglas Holtz- Eakin, Harvey Rosen, and Robert Weathers

July 1998 

Abstract:  The question of how entrepreneurship relates to income mobility is cogent given the current public debate about the sources of income inequality and mobility in United States society. We examine how experience with entrepreneurship has affected an individual's place in the earnings distribution. Our basic tack is to follow individuals' positions in the income distribution over time, and to see how their mobility (or lack thereof) was affected by involvement with entrepreneurship. Our main finding is that for low-income individuals there is some merit to the notion that the self-employed moved ahead in the earnings distribution relative to those who remained wage earners. On the other hand, for those at the upper end of the earnings distribution, those who became self-employed often advanced less in the earnings distribution than their salaried counterparts.

A revised version of this paper appears in Small Business Economics, Vol. 14, No. 4, June 2000, pp. 243-74.