The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees

Frank Fossen and Tobias J.M. Büttner

Economics of Education Review, 2013, vol. 37, issue C, 66-84

Abstract: We assess the relevance of formal education on the productivity of the self-employed, distinguishing between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups due to different levels of control over the use of their human capital. The analysis employs the German Socio-Economic Panel and accounts for the endogeneity of education and non-random selection. Results indicate that the returns to a year of education for opportunity entrepreneurs are similar to the paid employees’ rate of 8.8%, but 3 percentage points lower for necessity entrepreneurs. Pooling the two types of entrepreneurs tends to understate the value of education for opportunity entrepreneurs and may spark misguided hopes concerning necessity entrepreneurs. The results may also partly explain Europe/US differences in average entrepreneurial returns.

Keywords: Rate of return; Human capital; Productivity; Salary wage differentials; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: I20 J23 J24 J31 L26 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Related works:
Working Paper: The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees (2013)
Working Paper: The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees (2012)
Working Paper: The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees (2012)
Working Paper: The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees (2012)
Working Paper: The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:37:y:2013:i:c:p:66-84

DOI: 10.1016/j.econedurev.2013.08.005

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