The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees
Frank M. Fossen, Freie Universität Berlin, DIW Berlin and IZA, Germany ; Tobias J.M. Büttner, Technische Universität Berlin and Federal Office for Migration and Refugees, Germany
Economics of Education Review Volume 37, Number 1, ISSN 0272-7757 Publisher: Elsevier Ltd
We assess the relevance of formal education on the productivity of the self-employed, distinguishing between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups due to different levels of control over the use of their human capital. The analysis employs the German Socio-Economic Panel and accounts for the endogeneity of education and non-random selection. Results indicate that the returns to a year of education for opportunity entrepreneurs are similar to the paid employees’ rate of 8.8%, but 3 percentage points lower for necessity entrepreneurs. Pooling the two types of entrepreneurs tends to understate the value of education for opportunity entrepreneurs and may spark misguided hopes concerning necessity entrepreneurs. The results may also partly explain Europe/US differences in average entrepreneurial returns.
Fossen, F.M. & Büttner, T.J.M. (2013). The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees. Economics of Education Review, 37(1), 66-84. Elsevier Ltd.
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Lidia Santana Vega, Departamento de Didctica e Investigacin Educativa, Universidad de La Laguna, Spain; Olga Gonzlez-Morales, Departamento de Economa Aplicada y Mtodos Cuantitativos, Universidad de La Laguna, Spain; Luis Feliciano Garca, Departamento de Didctica e Investigacin Educativa, Universidad de La Laguna, Spain
Journal of New Approaches in Educational Research (NAER Journal) Vol. 5, No. 2 (Jul 15, 2016) pp. 123–129
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