Does entrepreneurship really reduce income inequality?

•Entrepreneurship and inequality: higher levels of entrepreneurship are associated with lower income inequality in a study of 62 countries.•Cultural factors: gender wage gap and diversity indicators significantly influence country-level entrepreneurship.•Instrumental variable: using gender wage gap as an instrument strengthens the relationship between entrepreneurship and reduced inequality.•Economic impact: one standard deviation increase in entrepreneurship leads to a 6–11 % reduction in income inequality.•Policy implication: promoting entrepreneurship can effectively mitigate income disparities and enhance economic inclusivity. This paper examines whether entrepreneurial activities reduce social inequality. Using data from 62 countries, we find that countries with higher levels of entrepreneurship have lower income inequality. We also find that various cultural factors including gender wage gap and diversity indicators influence country-level entrepreneurship. When we use gender wage gap as an instrument to account for potential endogeneity in the decision to become an entrepreneur, the entrepreneurship-inequality relation becomes stronger. In economic terms, one standard deviation in entrepreneurship reduces income inequality by 6–11 %, relative to the mean. Together, these findings suggest that entrepreneurial activities can be an effective strategy for mitigating income disparities and promoting economic inclusivity.