Impact of Human Capital on Entrepreneurial Earnings: Employing Parametric and Nonparametric Methods

Abstract

Economics literature provides ample evidence regarding the important positive effect of human capital on earnings. However, the self-employed have been consistently omitted in such studies. To fill this gap, I examine the effect of human capital on entrepreneurial earnings using National Survey of College Graduates dataset. To estimate the coefficients on income levels, I take advantage of three different econometric methods, namely OLS, Heckit and matching estimators. Regression results on men show that having higher education brings more success in terms of self-employment earnings. Evidence shows that men do better when they are self-employed whereas women are better off when they are wage workers. The most lucrative majors for male entrepreneurs are architecture, math, physics, chemistry and most fields of engineering. Women entrepreneurs who enjoy higher earnings are mostly majored in architecture, medicine, law, psychology and counseling. However, no particular education level is found to contribute to female entrepreneurial earnings.

Do Women Earn Less Even as Social Entrepreneurs?

“…women with respect to earnings from self-employment. She reports the returns to be large for men but heterogeneous for women (e.g., dependent on industry) -a finding mirrored in Karahan's (2013) analysis of educated Americans in the 1990's. 7…”

“…Indeed few studies have explored gender differences in earnings amongst entrepreneurs in general. Evidence from the US, Canada, Hungary and Norway (Berglann et al, 2011;Co et al, 2005;Hundley, 2001;Karahan, 2013;Leung, 2006;Roche, 2013) points to a significant gender pay gap, which may be even greater amongst entrepreneurs compared to wage employment There is also a literature suggesting that income might not be the only outcome of an entrepreneurial career (Gorgievski et al, 2011;Van Praag and Versloot, 2008). Entrepreneurship and especially social entrepreneurship might permit people to make occupational choices which take account of non-monetary phenomena such as their desire for job flexibility.…”