IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Are Education and Entrepreneurial Income Endogenous and Do Family Background Variables Make Sense as Instruments?: A Bayesian Analysis

  • Jörn H. Block
  • Lennart F. Hoogerheide
  • A. Roy Thurik

Education is a well-known driver of (entrepreneurial) income. The measurement of its influence, however, suffers from endogeneity suspicion. For instance, ability and occupational choice are mentioned as driving both the level of (entrepreneurial) income and of education. Using instrumental variables can provide a way out. However, three questions remain: whether endogeneity is really present, whether it matters and whether the selected instruments make sense. Using Bayesian methods, we find that the relationship between education and entrepreneurial income is indeed endogenous and that the impact of endogeneity on the estimated relationship between education and income is sizeable. We do so using family background variables and show that relaxing the strict validity assumption of these instruments does not lead to strongly different results. This is an important finding because family background variables are generally strongly correlated with education and are available in most datasets. Our approach is applicable beyond the field of returns to education for income. It applies wherever endogeneity suspicion arises and the three questions become relevant.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.363452.de/diw_sp0329.pdf
Download Restriction: no

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 329.

as
in new window

Length: 27 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp329
Contact details of provider: Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-671
Fax: xx49-30-89789-109
Web page: http://www.diw.de/en/soep
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:dgr:uvatin:20030050 is not listed on IDEAS
  2. repec:dgr:uvatin:20030046 is not listed on IDEAS
  3. van Praag, Mirjam C. & van Witteloostuijn, Arjen & van der Sluis, Justin, 2009. "Returns for Entrepreneurs vs. Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vs. Wage Employees," IZA Discussion Papers 4628, Institute for the Study of Labor (IZA).
  4. Justin van der Sluis & Mirjam van Praag & Wim Vijverberg, 2008. "Education And Entrepreneurship Selection And Performance: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 795-841, December.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. SOEP based publications

When requesting a correction, please mention this item's handle: RePEc:diw:diwsop:diw_sp329. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.