Education is argued to be an important driver of the decision to start a business. The measurement of its influence, however, is difficult since it is considered to be an endogenous variable. This study is the first to account for this endogeneity by using an instrumental variables approach. The effect of education on the decision to become self-employed is found to be strongly positive, much higher than the estimated effect in case no instrumental variables are used. That is, the higher the respondent's level of education, the greater the likelihood that he or she starts a business. Implications for method and practice are discussed.

education, endogeneity, entrepreneurial choice, entrepreneurship, instrumental variables, occupational choice, self-employment
Discrete Regression and Qualitative Choice Models; Discrete Regressors (jel C35), Education and Research Institutions: General (jel I20), Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24), Entrepreneurship (jel L26)
Tinbergen Institute
hdl.handle.net/1765/17090
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Tinbergen Institute

Block, J.H, Hoogerheide, L.F, & Thurik, A.R. (2009). Education and Entrepreneurial Choice: An Instrumental Variables Analysis (No. TI 2009-088/4). Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/17090