Van Praag et al. (2013) analyze whether the returns to formal education in terms of income differ between entrepreneurs and employees. Using US data (1979–2000), they find that entrepreneurs have higher returns to formal education than employees. They also find evidence that the level of personal control in one's occupation explains these higher returns. In the present study, we aim to replicate these findings using a dataset from a different country (Australia) and time period (2005–2017). Moreover, we extend the study by Van Praag et al. (2013) by distinguishing between entrepreneurs with and without employees. In accordance with Van Praag et al. (2013), we also find higher returns to education for entrepreneurs compared to employees. However, this finding mainly applies to the entrepreneurs without employees. Moreover, we do not find evidence for a mediating role of personal control in this relationship.

Earnings, Education, Entrepreneurship, Income, J24, J31, Job control, L26, Self-employment
Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24), Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. (jel J31), Entrepreneurship (jel L26),
Journal of Business Venturing Insights
Erasmus School of Economics

Hessels, S.J.A, Rietveld, C.A. (Cornelius A.), Thurik, A.R, & van der Zwan, P.W. (2020). The higher returns to formal education for entrepreneurs versus employees in Australia. Journal of Business Venturing Insights, 13. doi:10.1016/j.jbvi.2019.e00148