What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations

Nazim Habibov (), Elvin Afandi () and Alex Cheung ()
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Nazim Habibov: University of Windsor
Alex Cheung: University of Windsor

International Entrepreneurship and Management Journal, 14 pages

Abstract: Abstract We used a high-quality cross-sectional data set that covers a diverse set of 29 transitional countries, to find the effect of education of probability of people being self-employed using standard probit models and instrumental variable biprobit that address endogeneity. Our findings suggest a negative effect of university education on the propensity of being self-employed. This finding remains the same for the single-stage model (i.e. standard probit) and the instrumental variable model (i.e. biprobit). We found strong endogeneity in the estimation of education effect on the propensity of being self-employed, ignoring which renders estimations biased. Regression models, which do not address endogeneity tend to underestimate the negative effect of the education on the probability of being self-employed in the countries of transition. Researchers should use alternative approaches to reduce endogeneity, such as instrumental variables and longitudinal analysis.

Keywords: Education; Endogeneity; Instrumental variables; Self-employment; Transitional countries (search for similar items in EconPapers)
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DOI: 10.1007/s11365-016-0409-4

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