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The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees

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  • Frank M. Fossen
  • Tobias J. M. Büttner

Abstract

We assess the relevance of formal education for the productivity of the self-employed and distinguish 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 because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees' rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1241.

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Length: 40 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwwpp:dp1241

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Keywords: returns to education; opportunity; necessity; entrepreneurship;

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  1. The value of education to different types of people
    by Nicholas Gruen in Club Troppo on 2012-09-13 07:48:46

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