Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs

65 Pages Posted: 14 Sep 2017

See all articles by Fabiano Schivardi

Fabiano Schivardi

Luiss Guido Carli - Department of Economics and Finance; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR)

Claudio Michelacci

Einaudi Institute for Economics and Finance (EIEF)

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Date Written: September 12, 2017

Abstract

We rely on the Survey of Consumer Finances to study the return to education of US entrepreneurs since the late 1980s. We calculate the average yearly income that an entrepreneur expects to obtain during his venture, combining labor income, dividend payments, and capital gains upon selling the business. We find that the premium for postgraduate education has increased substantially more for entrepreneurs than for employees. Today an entrepreneur with a postgraduate degree earns on average 100,000 a year more than one with a college degree. And the difference is substantially greater at the higher quantiles of the income distribution. In the late 1980s, the differences had been close to zero. The rise in the postgraduate premium is mainly due to increased complementarity between the advanced formal skills provided by higher education and the applied practical expertise acquired through past labor market experience. In combination, these two factors have become increasingly valuable to running successful businesses.

Keywords: Skill premium, entrepreneurship

JEL Classification: J24, J31, M13

Suggested Citation

Schivardi, Fabiano and Michelacci, Claudio, Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs (September 12, 2017). Available at SSRN: https://ssrn.com/abstract=3035938 or http://dx.doi.org/10.2139/ssrn.3035938

Fabiano Schivardi (Contact Author)

Luiss Guido Carli - Department of Economics and Finance ( email )

Viale Romania 32
Rome, Rome 00187
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Claudio Michelacci

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

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