Quantum mechanics

Labour economics

Causation

Resizing

Percentage point

Cohort

Pedagogy

Economics

Entrepreneurship education

Physics

Formal education

Psychology

Entrepreneurship

Political science

Demographic economics

Economic policy

Internal medicine

Self-employment

Medicine

Finance

European union

Causality (physics)

Small Business Economics

Formal education is correlated with entrepreneurial activity and success, but correlation does not indicate causation. Education and entrepreneurship are both influenced by other related factors. The current study estimates the causal effects of formal education on entrepreneurship outcomes by instrumenting for an individual’s years of schooling using cohort mean years of maternal schooling observed decades prior. We differentiate self-employment by industry employment growth and firm incorporation status. Policymakers are especially interested in entrepreneurship with the potential to create substantial employment growth. We find that an additional year of schooling increases self-employment in high-growth industries by 1.12 percentage points for women and by 0.88 percentage points for men. Education reduces the probability of male self-employment in shrinking industries. Education also increases incorporated self-employment for women and men and reduces unincorporated self-employment among men but not women. The overall probability of self-employment increases with education for women but is unaffected by education for men. The results suggest that formal education enhances entrepreneurship. Education has long been correlated with entrepreneurial success; we provide the first evidence for a causal effect of education on high-growth industry entrepreneurship in the USA. Education also reduces self-employment in shrinking industries. Our analysis leverages differing education trends across states and ancestry groups to predict education levels for recent workers and provide causal estimates of the effect of education on entrepreneurship. We account for numerous other factors and conduct several tests to confirm that our results are stable across alternatives. Our study has important implications for researchers, policymakers, and broader society. The benefits of education are widely debated, and some worry that education is mostly about signaling and not skill development. Policymakers are also interested in how to facilitate innovative entrepreneurship that creates new products, new jobs, and economic prosperity. Our analysis indicates that education confers valuable knowledge and skills that enhance entrepreneurship and fuel societal well-being.

Does education enhance entrepreneurship?