- Returns for entrepreneurs versus employees: the effect of education and personal control on the relative performance of entrepreneurs vis-à-vis wage employees
- Number of pages
- Amsterdam: Faculteit Economie en Bedrijfskunde
- Tinbergen Discussion Paper
- Volume | Edition (Serie)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Amsterdam Business School Research Institute (ABS-RI)
How valuable is education for entrepreneurs� performance as compared to employees�? What might explain any differences? And does education affect peoples� occupational choices accordingly? We answer these questions based on a large panel of US labor force participants. We show that education affects peoples� decisions to become an entrepreneur negatively. We show furthermore that entrepreneurs have higher returns to education than employees (in terms of the comparable performance measure �income�). This is the case even when estimating individual fixed effects of the differential returns to education for spells in entrepreneurship versus wage employment, thereby accounting for selectivity into entrepreneurial positions based on fixed individual characteristics. We find these results irrespective of whether we control for general ability and/or whether we use instrumental variables to cope with the endogenous nature of education in income equations. Finally, we find (indirect) support for the argument that the higher returns to education for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education. Entrepreneurs have more personal control over the profitable employment of their human capital than wage employees.
Keywords: entrepreneurship, self-employment, returns to education, performance, personal control, locus of control, human capital, wages, incomes
Classification-JEL: J23, J24, J31, J44, M13
If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library, or send a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible.