Identifying the effect of college education on business and employment survival
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We use a multipronged identification strategy to estimate the effect of college education on business and employment survival. We account for the endogeneity of both education and business ownership with a competing risks duration model augmented with a college selection equation. We estimate the model jointly on the self-employed and salaried employees in the National Longitudinal Survey of Youth 1979. Unlike most previous studies, we find that college does not increase business survival. By contrast, a college degree significantly increases employment survival. Cognitive skills have a positive impact on survival for both the self-employed and employees. These findings suggest that college benefits the self-employed less than salaried, perhaps by generating skills more useful in employment than self-employment, or because of differences in the value of signaling.
KeywordsBusiness survival Employment survival College education Cognitive skills Locus of control
JEL ClassificationsC41 J24 L26
We thank Luigi Zingales, Erik G. Hurst, Robert J. LaLonde, Susanne M. Schennach, Steven N. Kaplan, Adair Morse, Luigi Guiso, Margarita Tsoutsoura, James J. Heckman, the participants to many seminars at the University of Chicago and the participants to the Brownbag Seminar at Boston Fed for useful comments. Jacob Bergmann Larsen provided excellent research assistance. All remaining errors are ours. This research was conducted with restricted access to Bureau of Labor Statistics (BLS) data. The views expressed here do not necessarily reflect the views of the BLS. Financial support from the Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged.
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