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Why Are the Returns to Education Higher for Entrepreneurs than for Employees?

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Author Info

  • van der Sluis, Justin

    ()
    (University of Amsterdam)

  • van Praag, Mirjam

    ()
    (Copenhagen Business School)

  • van Witteloostuijn, Arjen

    ()
    (University of Antwerp)

Abstract

We compare the returns to education (RTE) for entrepreneurs and employees, based on 19 waves of the NLSY database. By using instrumental variable techniques (IV) and taking account of selectivity, we find that the RTE are significantly higher for entrepreneurs than for employees (18.3 percent and 9.9 percent, respectively). We perform various analyses in an attempt to explain the difference. We find (indirect) support for the argument that the higher RTE for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3058.

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Length: 40 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3058

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Related research

Keywords: entrepreneurship; self-employment; returns to education employment;

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Citations

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Cited by:
  1. Oosterbeek, Hessel & van Praag, Mirjam & IJsselstein, Auke, 2008. "The Impact of Entrepreneurship Education on Entrepreneurship Competencies and Intentions: An Evaluation of the Junior Achievement Student Mini-Company Program," IZA Discussion Papers 3641, Institute for the Study of Labor (IZA).
  2. Douhan, Robin & van Praag, Mirjam, 2009. "Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework," IZA Discussion Papers 4211, Institute for the Study of Labor (IZA).
  3. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
  4. Hartog, Joop & van Praag, Mirjam & van der Sluis, Justin, 2008. "If You Are So Smart, Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs versus Employees," IZA Discussion Papers 3648, Institute for the Study of Labor (IZA).
  5. Francesco Ferrante, 2009. "Education, Aspirations and Life Satisfaction," Kyklos, Wiley Blackwell, vol. 62(4), pages 542-562, November.
  6. Joern H. Block & Marcus Wagner, 2010. "Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earning s Differentials," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(2), pages 154-174, April.
  7. Joop Hartog & Mirjam van Praag & Justin van der Sluis, 2008. "If you are so smart, why aren't you an Entrepreneur?," Tinbergen Institute Discussion Papers 08-073/3, Tinbergen Institute.
  8. Oosterbeek, Hessel & van Praag, Mirjam & Ijsselstein, Auke, 2010. "The impact of entrepreneurship education on entrepreneurship skills and motivation," European Economic Review, Elsevier, vol. 54(3), pages 442-454, April.
  9. Hessel Oosterbeek & Mirjam van Praag & Auke IJsselstein, 2008. "The Impact of Entrepreneurship Education on Entrepreneurship Competencies and Intentions," Tinbergen Institute Discussion Papers 08-038/3, Tinbergen Institute.

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