van der Sluis, Justin van Praag, C. Mirjam van Witteloostuijn, Arjen
IZA Discussion Papers No. 3058
Institute for the Study of Labor (IZA), Bonn
We compare the returns to education (RTE) for entrepreneurs and employees, based on 19 waves of the NLSY database. By using instrumental variable techniques (IV) and taking account of selectivity, we find that the RTE are significantly higher for entrepreneurs than for employees (18.3 percent and 9.9 percent, respectively). We perform various analyses in an attempt to explain the difference. We find (indirect) support for the argument that the higher RTE for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education.
Entrepreneurship self-employment returns to education employment