C.M. van Praag
- Schooling, Capital Constraints and Entrepreneurial Performance: The Endogenous Triangle
- Journal of Business & Economic Statistics
- Volume | Issue number
- 24 | 4
- Pages (from-to)
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Amsterdam Business School Research Institute (ABS-RI)
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%.
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