Do Elite Colleges Matter? The Impact of Elite College Attendance on Entrepreneurship Decisions and Career Dynamics

Elite college attendance significantly impact on subsequent entrepreneurship decisions and career dynamics. We find that an elite college degree is positively correlated with entrepreneurship (defined as owning an incorporated business) but not with other forms of self-employment. We develop an overlapping generations model that captures self-selection in education and career choices based on heterogeneous ability and family wealth endowments over the lifecycle. Our estimates show that (1) entrepreneurs and other self-employed individuals require different types of human capital and (2) elite colleges generate considerably more human capital gain than ordinary colleges, particularly for entrepreneurs. Distinguishing between elite and ordinary colleges improves our prediction of entrepreneurship decisions. Our simulation shows that moving elite college graduates to non-elite colleges significantly reduce their likelihood of becoming entrepreneurs, but not other self-employment. Overall, providing subsidies for elite colleges is more efficient than subsidizing their non-elite counterparts in encouraging entrepreneurship, improving intergenerational mobility and welfare.