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What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations

Author

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  • Nazim Habibov

    () (University of Windsor)

  • Elvin Afandi

    () (Islamic Development Bank Group)

  • Alex Cheung

    () (University of Windsor)

Abstract

Abstract We used a high-quality cross-sectional data set that covers a diverse set of 29 transitional countries, to find the effect of education of probability of people being self-employed using standard probit models and instrumental variable biprobit that address endogeneity. Our findings suggest a negative effect of university education on the propensity of being self-employed. This finding remains the same for the single-stage model (i.e. standard probit) and the instrumental variable model (i.e. biprobit). We found strong endogeneity in the estimation of education effect on the propensity of being self-employed, ignoring which renders estimations biased. Regression models, which do not address endogeneity tend to underestimate the negative effect of the education on the probability of being self-employed in the countries of transition. Researchers should use alternative approaches to reduce endogeneity, such as instrumental variables and longitudinal analysis.

Suggested Citation

  • Nazim Habibov & Elvin Afandi & Alex Cheung, 2017. "What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations," International Entrepreneurship and Management Journal, Springer, vol. 13(2), pages 487-500, June.
  • Handle: RePEc:spr:intemj:v:13:y:2017:i:2:d:10.1007_s11365-016-0409-4
    DOI: 10.1007/s11365-016-0409-4
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