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

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  • Hatice Karahan

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.

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  • Hatice Karahan, 2013. "Impact of Human Capital on Entrepreneurial Earnings: Employing Parametric and Nonparametric Methods," Journal of Economics and Behavioral Studies, AMH International, vol. 5(5), pages 307-315.
    • Handle: RePEc:rnd:arjebs:v:5:y:2013:i:5:p:307-315
    DOI: 10.22610/jebs.v5i5.406
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    1. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    2. Aki Kangasharju & Sari Pekkala, 2001. "The Role of Education in Self-Employment Success," Studies in Economics 0116, School of Economics, University of Kent.
    3. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 581-605, June.
    4. Gill, Andrew M, 1988. "Choice of Employment Status and the Wages of Employees and the Self-employed: Some Further Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 229-234, July-Sept.
    5. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
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    Cited by:

    1. Estrin, Saul & Stephan, Ute & Vujic, Suncica, 2014. "Do Women Earn Less Even as Social Entrepreneurs?," IZA Discussion Papers 8650, Institute of Labor Economics (IZA).

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