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The higher returns to formal education for entrepreneurs versus employees

Author Info

Listed author(s):
  • Mirjam Praag

    ()

  • Arjen van Witteloostuijn
  • Justin van der Sluis

Abstract

How valuable is formal education for entrepreneurs’ income relative to employees’? And if the income returns to formal education are different for entrepreneurs vis-à-vis employees, what might be a plausible explanation? To explore these questions, we analyze a large representative US panel. We show that entrepreneurs have higher returns to formal education than employees. We refer to this as the entrepreneurship returns puzzle. We run post hoc analyses to explore a number of potential explanations of this puzzle. Indirectly, our analysis indicates that the higher returns to formal education for entrepreneurs might be due to the fewer organizational constraints they face, leading to more personal control over how to use their human capital, compared to employees. Copyright Springer Science+Business Media, LLC. 2013

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File URL: http://hdl.handle.net/10.1007/s11187-012-9443-y
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Article provided by Springer in its journal Small Business Economics.

Volume (Year): 40 (2013)
Issue (Month): 2 (February)
Pages: 375-396

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Handle: RePEc:kap:sbusec:v:40:y:2013:i:2:p:375-396
DOI: 10.1007/s11187-012-9443-y
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/new+%26+forthcoming+titles+%28default%29/journal/11187/PS2

Keywords: Entrepreneurship; Self-employment; Education; Locus of control; Human capital; Wages; Incomes; J23; J24; J31; J44; M13; L26;

Find related papers by JEL classification:

  • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
  • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
  • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
  • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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