Small Business Economics

, Volume 40, Issue 2, pp 375–396 | Cite as

The higher returns to formal education for entrepreneurs versus employees

  • Mirjam Van Praag
  • Arjen van Witteloostuijn
  • Justin van der Sluis
Article

Abstract

How valuable is formal education for entrepreneurs’ income relative to employees’? And if the income returns to formal education are different for entrepreneurs vis-à-vis employees, what might be a plausible explanation? To explore these questions, we analyze a large representative US panel. We show that entrepreneurs have higher returns to formal education than employees. We refer to this as the entrepreneurship returns puzzle. We run post hoc analyses to explore a number of potential explanations of this puzzle. Indirectly, our analysis indicates that the higher returns to formal education for entrepreneurs might be due to the fewer organizational constraints they face, leading to more personal control over how to use their human capital, compared to employees.

Keywords

Entrepreneurship Self-employment Education Locus of control Human capital Wages Incomes 

JEL Classifications

J23 J24 J31 J44 M13 L26 

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Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  • Mirjam Van Praag
    • 1
  • Arjen van Witteloostuijn
    • 2
  • Justin van der Sluis
    • 3
  1. 1.Faculty of Economics and Business, Amsterdam Center for Entrepreneurship (ACE)University of AmsterdamAmsterdamThe Netherlands
  2. 2.School of Economics and ManagementTilburg UniversityTilburgThe Netherlands
  3. 3.RabobankUtrechtThe Netherlands

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