Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework

Douhan, Robin; Praag, C. Mirjam van

doi:10.2139/ssrn.1421765

“…This result is consistent with recent insights and evidence in support of higher levels of personal control and autonomy in entrepreneurship than in wage employment (e.g., Benz and Frey, 2008;Douhan and Van Praag, 2009;Hyytinen et al, 2008) and organization theory (e.g., Dobrev and Barnett, 2005;Sørensen, 2007;Özcan and Reichstein, 2009). The higher returns to education for entrepreneurs are due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education.…”

Section: Conclusion Contributionssupporting

confidence: 92%

“…What could be the underlying mechanism? Douhan and Van Praag (2009) build a theoretical model proposing that the underlying mechanism is "personal control". The type of control they refer to is an individual's control over the employment of and accruals from human capital.…”

Section: Hypothesesmentioning

confidence: 99%

“…Using insights from personal control theory (e.g., Benz and Frey, 2008;Douhan and Van Praag, 2009;Hyytinen et al, 2008), we argue that the higher returns to education for entrepreneurs are due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education. As an entrepreneur, an individual can operate as a residual claimant.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Returns for Entrepreneurs Versus Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vis-a-vis Wage Employees

Praag

¹

,

Witteloostuijn

²

,

Sluis

³

2009

Self Cite

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Returns for entrepreneurs versus employees: the effect of education and personal control on the relative performance of entrepreneurs vis-à-vis wage employees van Praag, C.M.; van Witteloostuijn, A.; van der Sluis, J. Link to publication General rightsIt is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s) and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an open content license (like Creative Commons). Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: http://uba.uva.nl/en/contact, or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. Returns for Entrepreneurs versus EmployeesThe effect of education and personal control on the relative performance of entrepreneurs vis-à-vis wage employees ABSTRACT How valuable is education for entrepreneurs' performance as compared to employees'? What might explain any differences? And does education affect peoples' occupational choices accordingly? We answer these questions based on a large panel of US labor force participants. We show that education affects peoples' decisions to become an entrepreneur negatively. We show furthermore that entrepreneurs have higher returns to education than employees (in terms of the comparable performance measure 'income'). This is the case even when estimating individual fixed effects of the differential returns to education for spells in entrepreneurship versus wage employment, thereby accounting for selectivity into entrepreneurial positions based on fixed individual characteristics. We find these results irrespective of whether we control for general ability and/or whether we use instrumental variables to cope with the endogenous nature of education in income equations. Finally, we find (indirect) support for the argument that the higher returns to education for entrepreneurs is due to fewer

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“…According to Douhan and Van Praag (2009) and , entrepreneurs have more control in which ways to employ their human capital than employees, who face organisational constraints. 9 Entrepreneurs have greater scope to align their business with their specific capabilities than paid employees, who have to fulfil assigned tasks, obey rules set by superiors, and stick to work descriptions that are not individually tailored to them.…”

Section: Returns To Education Of Employees and Entrepreneursmentioning

confidence: 99%

The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees

Fossen

¹

,

Büttner

²

2013

Economics of Education Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may www.econstor.euThe returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees 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.JEL classification: J23, J24, J31, I20, L26

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“…According to Douhan and Van Praag (2009) In their literature review of the empirical evidence, Van der Sluis et al (2008) summarise that studies using US data tend to report returns to education that are higher for entrepreneurs than for employees, whereas in Europe the opposite is found, although studies were only available for the UK, Italy, and the Netherlands. Van Praag et al (2009), who take into 8 account the endogeneity of education (in contrast to the studies surveyed by Van der Sluis et al, 2008), confirm higher returns for entrepreneurs in the US.…”

Section: Returns To Education Of Employees and Entrepreneursmentioning

confidence: 99%

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

Fossen

¹

,

Buettner²

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may www.econstor.euThe returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees 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.JEL classification: J23, J24, J31, I20, L26

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Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework

Cited by 11 publications

References 18 publications

Returns for Entrepreneurs Versus Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vis-a-vis Wage Employees

Returns for Entrepreneurs Versus Employees: The Effect of Education and Personal Control on the Relative Performance of Entrepreneurs vis-a-vis Wage Employees

The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees

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

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