Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/113684 
Year of Publication: 
2015
Series/Report no.: 
HWWI Research Paper No. 166
Publisher: 
Hamburgisches WeltWirtschaftsInstitut (HWWI), Hamburg
Abstract: 
Contrary to employees, there is no clear evidence that entrepreneurs' education positively effects income. In this study we propose that entrepreneurs can benefit from their education as a signal during the recruitment process of employees. This process is then assumed to follow a matching of equals among equals. Using rich data from Germany and Denmark we fully confirm a matching on qualification levels for high-skilled employees, partially for medium-skilled employees but not for low-skilled employees, suggesting that as skill levels of employees decrease it becomes equally probable that they work for different founders. Founder qualification is the most reliable predictor of recruitment choices over time. Our findings are robust to numerous control variables as well as across industries and firm age.
Subjects: 
returns to education
labor demand of small firms
human capital
matching
signaling
JEL: 
J23
J24
J21
Document Type: 
Working Paper

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