Arbeitspapier
Returns for Entrepreneurs versus Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vis-a-vis Wage Employees
How valuable is education for entrepreneurs’ performance as compared to employees’? What might explain any differences? And does education affect peoples’ occupational choices accordingly? We answer these questions based on a large panel of US labor force participants. We show that education affects peoples’ decisions to become an entrepreneur negatively. We show furthermore that entrepreneurs have higher returns to education than employees (in terms of the comparable performance measure ‘income’). This is the case even when estimating individual fixed effects of the differential returns to education for spells in entrepreneurship versus wage employment, thereby accounting for selectivity into entrepreneurial positions based on fixed individual characteristics. We find these results irrespective of whether we control for general ability and/or whether we use instrumental variables to cope with the endogenous nature of education in income equations. Finally, we find (indirect) support for the argument that the higher returns to education for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education. Entrepreneurs have more personal control over the profitable employment of their human capital than wage employees.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. 09-111/3
- Classification
-
Wirtschaft
Labor Demand
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials
Professional Labor Markets; Occupational Licensing
New Firms; Startups
- Subject
-
entrepreneurship
self-employment
returns to education
performance
personal control
locus of control
human capital
wages
incomes
Lohnniveau
Entrepreneurship-Ansatz
Selbstständige
Vergleich
Arbeitskräfte
Humankapital
Bildungsertrag
Berufswahl
USA
- Event
-
Geistige Schöpfung
- (who)
-
van Praag, Mirjam
van Witteloostuijn, Arjen
van der Sluis, Justin
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2009
- Handle
- Last update
-
10.03.2025, 11:46 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- van Praag, Mirjam
- van Witteloostuijn, Arjen
- van der Sluis, Justin
- Tinbergen Institute
Time of origin
- 2009
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