Who Becomes an Entrepreneur? The Role of Ability, Education, and Sector Choice

UB Economics Working Papers E18/381

73 Pages Posted: 28 Sep 2018

See all articles by Montserrat Vilalta-Bufí

Montserrat Vilalta-Bufí

University of Barcelona - Department of Economics; University of Barcelona - Center for Research in Welfare Economics

Aleksander Kucel

ESCSET, Universitat Pompeu Fabra

Giovanni Giusti

Universitat Pompeu Fabra - Tecnocampus

Date Written: August 31, 2018

Abstract

The classical occupational choice model does not explain the simultaneous existence of low and high ability entrepreneurs. In this paper, we study the decision to become an entrepreneur when individuals choose their education level and the economic sector where to operate. We distinguish two sectors: the knowledge and the traditional sector. The knowledge sector requires individuals to invest in education. Under this framework, two results are possible: one where only high ability individuals become entrepreneurs, and one with the coexistence of low and high ability entrepreneurs. This framework provides a rational explanation of the relationship between ability, education, and self-employment. Using PIAAC data, we test the empirical implications of the model. We find that most countries have an equilibrium with low and high ability entrepreneurs.

Keywords: Entrepreneurship, human capital entry barrier, occupational choice model, ability, sector choice.

JEL Classification: J21, J24, L26.

Suggested Citation

Vilalta-Bufí, Montserrat and Kucel, Aleksander and Giusti, Giovanni, Who Becomes an Entrepreneur? The Role of Ability, Education, and Sector Choice (August 31, 2018). UB Economics Working Papers E18/381. Available at SSRN: https://ssrn.com/abstract=3246966 or http://dx.doi.org/10.2139/ssrn.3246966

Montserrat Vilalta-Bufí (Contact Author)

University of Barcelona - Department of Economics ( email )

Barcelona
Spain

University of Barcelona - Center for Research in Welfare Economics ( email )

Barcelona, 08028
Spain

HOME PAGE: http://www.creb.ub.edu/

Aleksander Kucel

ESCSET, Universitat Pompeu Fabra ( email )

Avinguda Ernest Lluch 32 (Porta Laietana)
Mataró, Barcelona 08302
Spain
931 69 65 01 (Phone)
08302 (Fax)

HOME PAGE: http://www.tecnocampus.cat

Giovanni Giusti

Universitat Pompeu Fabra - Tecnocampus ( email )

Avinguda Ernest Lluch, 32
Mataró, Barcelona 08302
Spain

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