The Atlas of Self-Employment in America: Incorporation, Gender, and the Geography of Entrepreneurial Returns

Abstract

The self-employment earnings penalty—one of the most robust and puzzling findings in labor economics—masks profound heterogeneity by legal form, geography, and gender. Using inverse probability weighting on American Community Survey data covering 1.4 million prime-age workers across ten major U.S. states (2019, 2021–2022; 2020 excluded due to data collection disruptions), I decompose this penalty along three dimensions. First, incorporation status: incorporated self-employed workers earn a 7 percent premium ($+0.069$ log points) while unincorporated workers face a 46 percent penalty ($-0.623$ log points). Second, geography: the aggregate penalty ranges from 23 percent in Florida ($-0.264$ log points) to 34 percent in California ($-0.420$ log points), with incorporated premiums highest in Texas ($+12%$, $+0.114$ log points) and lowest in New York (near zero, not statistically significant). Third, gender: men experience a smaller aggregate penalty ($-0.267$ log points, $-23%$) than women ($-0.477$ log points, $-38%$), and critically, only men enjoy the incorporated premium ($+0.111$ log points, $+12%$); women show no earnings benefit from incorporation. These patterns—visualized in a state-by-state "atlas" of self-employment—reconcile decades of conflicting findings and reveal that the returns to entrepreneurship depend fundamentally on legal structure, location, and gender. The findings suggest that policies promoting self-employment will have heterogeneous effects, benefiting some workers while leaving others worse off.