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Schooling, Capital Constraints and Entrepreneurial Performance

Author

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  • Simon Parker

    (Durham University)

  • Mirjam van Praag

    (Universiteit van Amsterdam, SCHOLAR)

Abstract

We estimate the impact of schooling and capital constraints at the time of startup on the performance of Dutch entrepreneurial ventures, taking into account the potential endogeneity and interdependence of these variables. Instrumental variable estimates indicate that a 1 percentage point relaxation of capital constraints increases entrepreneurs' gross business incomes by 3.9% on average. Education enhances entrepreneurs' performance both directly—with a rate of return of 13.7%—and indirectly, because each extra year of schooling decreases capital constraints by 1.18 percentage points. The indirect effect of education on entrepreneurs' performance is estimated to be 3.0–4.6%. This discussion paper has resulted in a publication in the Journal of Business and Economic Statistics , 24(4), 416-31.

Suggested Citation

  • Simon Parker & Mirjam van Praag, 2004. "Schooling, Capital Constraints and Entrepreneurial Performance," Tinbergen Institute Discussion Papers 04-106/3, Tinbergen Institute, revised 07 Mar 2005.
    • Handle: RePEc:tin:wpaper:20040106
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    2. Anu Tokila & Hannu Tervo, 2011. "Regional differences in returns to education for entrepreneurs versus wage earners," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 689-710, December.
    3. Mr. Mauricio Vargas, 2015. "Identifying Binding Constraints to Growth: Does Firm Size Matter?," IMF Working Papers 2015/003, International Monetary Fund.
    4. Vargas, Jose P Mauricio, 2012. "Binding Constraints: Does Firm Size Matter?," MPRA Paper 41286, University Library of Munich, Germany.

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    More about this item

    Keywords

    entrepreneurship; self-employment; returns to education; capital constraint; liquidity constraint; borrowing constraint;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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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