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What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations

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  • Nazim Habibov

    (University of Windsor)

  • Elvin Afandi

    (Islamic Development Bank Group)

  • Alex Cheung

    (University of Windsor)

Abstract

We used a high-quality cross-sectional data set that covers a diverse set of 29 transitional countries, to find the effect of education of probability of people being self-employed using standard probit models and instrumental variable biprobit that address endogeneity. Our findings suggest a negative effect of university education on the propensity of being self-employed. This finding remains the same for the single-stage model (i.e. standard probit) and the instrumental variable model (i.e. biprobit). We found strong endogeneity in the estimation of education effect on the propensity of being self-employed, ignoring which renders estimations biased. Regression models, which do not address endogeneity tend to underestimate the negative effect of the education on the probability of being self-employed in the countries of transition. Researchers should use alternative approaches to reduce endogeneity, such as instrumental variables and longitudinal analysis.

Suggested Citation

  • Nazim Habibov & Elvin Afandi & Alex Cheung, 2017. "What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations," International Entrepreneurship and Management Journal, Springer, vol. 13(2), pages 487-500, June.
    • Handle: RePEc:spr:intemj:v:13:y:2017:i:2:d:10.1007_s11365-016-0409-4
    DOI: 10.1007/s11365-016-0409-4
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    3. Cheng, Zhiming & Smyth, Russell, 2021. "Education and migrant entrepreneurship in urban China," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 506-529.
    4. Nazim Habibov & Alena Auchynnikava & Rong Luo, 2021. "Does the height to entrepreneurship nexus have two stages? New evidence from 27 nations," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 11(1), pages 141-152, December.

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