Schooling, Capital Constraints and Entrepreneurial Performance

Simon Parker () and Mirjam Praag

No 04-106/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: entrepreneurship; self-employment; returns to education; capital constraint; liquidity constraint; borrowing constraint (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 M13 (search for similar items in EconPapers)
Date: 2004-09-23, Revised 2005-03-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20040106

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