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

Freie Universität Berlin, School of Business & Economics Discussion Paper No. 2012/19

DIW Berlin Discussion Paper No. 1241

44 Pages Posted: 28 Aug 2012 Last revised: 5 Sep 2012

See all articles by Frank M. Fossen

Frank M. Fossen

University of Nevada, Reno; IZA Institute of Labor Economics

Tobias Buettner

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: August 21, 2012

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 Buettner, Tobias, The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees (August 21, 2012). Freie Universität Berlin, School of Business & Economics Discussion Paper No. 2012/19, DIW Berlin Discussion Paper No. 1241, Available at SSRN: https://ssrn.com/abstract=2136859 or http://dx.doi.org/10.2139/ssrn.2136859

Frank M. Fossen (Contact Author)

University of Nevada, Reno ( email )

1664 N. Virginia Street
Reno, NV 89557-0030
United States

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

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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

Tobias Buettner

affiliation not provided to SSRN ( email )

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