Re-Estimating the Returns to Education by Employment Status: Paid Employed vs. Own-Account Workers vs. Employers

Abstract

This article is devoted to the exploration of the differences in the returns to education among wage earners and self-employed workers, while distinguishing between own-account workers and employers. Using a data base of EU-countries, we provide new evidence that qualifies some previous empirical findings found in the literature. In particular, we find that tertiary education significantly improves the returns to education for employers (relative to wage earners) while secondary education significantly improves the returns to education for own-account workers (relative to wage earners). However, relative to wage earners we also find a negative impact on earnings of self-employment activity as such (i.e., unrelated to education levels). This holds both for own-account workers and employers.

Keywords: entrepreneurship, education returns, endogeneity bias, signalling, human capital, EU-15

JEL-classifications: L26, J24, C10, N30, O52