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.
Highlights
Most of the studies that focus on wage and salary workers show that human capital is the most significant determinant of their earnings
Data and Descriptive Statistics: For the empirical analysis, I use 1990 Decennial Census conducted by the Bureau of Census and The National Survey of College Graduates (NSCG) dataset which provide detailed information on 149,000 Americans with a Bachelor’s degree or higher
The primary purpose of this paper is to analyze the effects of human capital on entrepreneurial earnings
Summary
Most of the studies that focus on wage and salary workers show that human capital is the most significant determinant of their earnings. The level of schooling and the field of the study are both found to affect earnings of employees considerably. No study has analyzed the impact of educational degrees and majors on the success of the self-employed. This could be partly because of the data limitations regarding majors. To conduct this study I take advantage of the Decennial Census conducted by the Bureau of Census and The National Survey of College Graduates (NSCG) dataset. This dataset supplies detailed information on the degrees and majors as well as demographic characteristics of
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