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Returns to Education and Experience in Self-Employment: Evidence from Germany
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 123 (2003), Iss. 1 : pp. 139–150
Williams, Donald R.
This paper compares the returns to human capital in the self-employed and wage-employed sectors of the economy. Using data from the former West German sample of the German Socioeconomic Panel survey for the 1984 – 1997 time period, we estimate returns to education and work experience from standard log-earnings equations for selfemployed and wage-employed workers. Two key results are found. First, additional schooling has a smaller effect on earnings for the self-employed than for the wage-employed. Indeed, educational attainment has an insignificant effect on self-employment earnings. Second, prior self-employment experience receives a lower return in wageemployment than does prior wage-employment experience. These results are consistent across specifications controlling for education endogeneity and self-selection bias.