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Returns to education and experience in self-employment: Evidence from Germany

  • Williams, Donald R.

    (Kent State University, Kent OH 44242, USA)

This paper compares the returns to human capital in the self-employed and wage-employed sectors of the economy. Using data from the former West German sample of the German Socioeconomic Panel survey for the 1984-1997 time period, we estimate returns to education and work experience from standard log-earnings equations for self-employed and wage-employed workers. Two key results are found. First, additional schooling has a smaller effect on earnings for the self-employed than for the wage-employed. Indeed, educational attainment has an insignificant effect on self-employment earnings. Second, prior self-employment experience receives a lower return in wage-employment than does prior wage-employment experience. These results are consistent across specifications controlling for education endogeneity and self-selection bias.

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Paper provided by IRISS at CEPS/INSTEAD in its series IRISS Working Paper Series with number 2002-04.

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Date of creation: Dec 2002
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Handle: RePEc:irs:iriswp:2002-04
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  1. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
  2. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
  3. Lechner, Michael, 1995. "Some Specification Tests for Probit Models Estimated on Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 475-88, October.
  4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  5. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
  6. Williams, Donald R., 2000. "Consequences of self-employment for women and men in the United States," Labour Economics, Elsevier, vol. 7(5), pages 665-687, September.
  7. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  8. Clain, Suzanne Heller, 2000. "Gender differences in full-time self-employment," Journal of Economics and Business, Elsevier, vol. 52(6), pages 499-513.
  9. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
  10. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  11. Blanchflower, David G & Meyer, Bruce D, 1994. " A Longitudinal Analysis of the Young Self-Employed in Australia and the United States," Small Business Economics, Springer, vol. 6(1), pages 1-19, February.
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