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Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs

Author

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  • Claudio Michelacci

    (EIEF and CEPR)

  • Fabiano Schivardi

    (LUISS, EIEF and CEPR)

Abstract

We rely on the Survey of Consumer Finances to study the return to education of US entrepreneurs since the late 1980s. We calculate the average yearly income that an entrepreneur expects to obtain during his venture, combining labor income, dividend payments, and capital gains upon selling the business. We find that the premium for postgraduate education has increased substantially more for entrepreneurs than for employees. Today an entrepreneur with a postgraduate degree earns on average $100,000 a year more than one with a college degree. And the difference is substantially greater at the higher quantiles of the income distribution. In the late 1980s, the differences had been close to zero. The rise in the postgraduate premium is mainly due to increased complementarity between the advanced formal skills provided by higher education and the applied practical expertise acquired through past labor market experience. In combination, these two factors have become increasingly valuable to running successful businesses.

Suggested Citation

  • Claudio Michelacci & Fabiano Schivardi, 2016. "Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs," EIEF Working Papers Series 1612, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2017.
    • Handle: RePEc:eie:wpaper:1612
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    2. Mckenzie,David J. & Sansone,Dario & Mckenzie,David J. & Sansone,Dario, 2017. "Man vs. machine in predicting successful entrepreneurs : evidence from a business plan competition in Nigeria," Policy Research Working Paper Series 8271, The World Bank.
    3. Helu Jiang & Faisal Sohail, 2023. "Skill-Biased Entrepreneurial Decline," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 18-44, April.
    4. Audinga Baltrunaite & Sara Formai & Andrea Linarello & Sauro Mocetti, 2022. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Questioni di Economia e Finanza (Occasional Papers) 678, Bank of Italy, Economic Research and International Relations Area.
    5. Naijia Guo & Charles Ka Yui Leung, 2021. "Do elite colleges matter? The impact on entrepreneurship decisions and career dynamics," Quantitative Economics, Econometric Society, vol. 12(4), pages 1347-1397, November.
    6. Anih Paul C. & Nissi Chicheta F. & Akpan Uduakobong E., 2019. "Real Estate Entrepreneurial Training and Education in Tertiary Institution: An Antidote to Unemployment," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 7(1), pages 172-189, January.
    7. Sergio Salgado, 2019. "Technical Change and Entrepreneurship," 2019 Meeting Papers 634, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • 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
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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