Are Education and Entrepreneurial Income Endogenous? A Bayesian Analysis

Entrepreneurship Research Journal, 2(3), 2012

21 Pages Posted: 20 Mar 2010 Last revised: 1 Mar 2014

See all articles by Jorn H. Block

Jorn H. Block

University of Trier - Faculty of Management; Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)

Lennart F. Hoogerheide

VU University Amsterdam

Roy Thurik

Montpellier Business School; Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC); Erasmus Research Institute of Management (ERIM); EIM Netherlands - Business and Policy Research; Tinbergen Institute

Date Written: February 1, 2010

Abstract

Education is a well-known driver of (entrepreneurial) income. The measurement of its influence, however, suffers from endogeneity suspicion. For instance, ability and occupational choice are mentioned as driving both the level of (entrepreneurial) income and of education. Using instru-mental variables can provide a way out. However, two questions remain: whether endogeneity is really present and whether it matters for the size of the estimated relationship. Using Bayesian methods, we find that the relationship between education and entrepreneurial income is indeed en-dogenous and that the impact of endogeneity on the estimated relationship between education and income is sizeable. Implications of our findings for research and practice are discussed.

Keywords: Education, income, entrepreneurship, self-employment, endogeneity, instrumental variables, Bayesian analysis

JEL Classification: C11, L26, M13, J24

Suggested Citation

Block, Jorn Hendrich and Hoogerheide, Lennart F. and Thurik, Roy, Are Education and Entrepreneurial Income Endogenous? A Bayesian Analysis (February 1, 2010). Entrepreneurship Research Journal, 2(3), 2012. Available at SSRN: https://ssrn.com/abstract=1570725 or http://dx.doi.org/10.2139/ssrn.1570725

Jorn Hendrich Block (Contact Author)

University of Trier - Faculty of Management ( email )

D-54296
Germany

Erasmus University Rotterdam (EUR) - Institute of Management (ERIM) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Lennart F. Hoogerheide

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Roy Thurik

Montpellier Business School

France

Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC) ( email )

3000 DR Rotterdam
Netherlands
+31 10 408 2232 (Phone)
+31 10 408 9146 (Fax)

HOME PAGE: http://www.thurik.com

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

EIM Netherlands - Business and Policy Research

Postbus 7001
2701 AA Zoetermeer
Netherlands
+31 79 341 3634 (Phone)
+31 79 331 3742 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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