DP12312-2 | Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs

Publication Date

09/25/2018

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Abstract

We rely on the Survey of Consumer Finances to study the return to education of US entrepreneurs since the late 1980s. We calculate the average yearly income that an entrepreneur expects to obtain during his venture, combining labor income, dividend payments, and capital gains upon selling the business. We find that the premium for postgraduate education has increased substantially more for entrepreneurs than for employees. Today an entrepreneur with a postgraduate degree earns on average $100,000 a year more than one with a college degree. The difference more than doubles at the higher quantiles of the income distribution. In the late 1980s, differences were close to zero. The rise in the postgraduate premium for entrepreneurs is mainly due to increased complementarity between higher education and past labor market experience. %In combination, these