The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees

43 Pages Posted: 6 Oct 2012

See all articles by Frank M. Fossen

Frank M. Fossen

University of Nevada, Reno; IZA Institute of Labor Economics

Tobias Büttner

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Abstract

We assess the relevance of formal education for the productivity of the self-employed and distinguish 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 because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees’ rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs.

Keywords: returns to education, opportunity, necessity, entrepreneurship

JEL Classification: J23, J24, J31, I20, L26

Suggested Citation

Fossen, Frank M. and Büttner, Tobias, The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees. IZA Discussion Paper No. 6819, Available at SSRN: https://ssrn.com/abstract=2157961 or http://dx.doi.org/10.2139/ssrn.2157961

Frank M. Fossen (Contact Author)

University of Nevada, Reno ( email )

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HOME PAGE: http://business.unr.edu/faculty/ffossen/

IZA Institute of Labor Economics

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HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=2906

Tobias Büttner

affiliation not provided to SSRN

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