Are Education and Entrepreneurial Income Endogenous and Do Family Background Variables Make Sense as Instruments?: A Bayesian Analysis

Education is a well-known driver of (entrepreneurial) income. The measurement of its influence, however, suffers from endogeneity suspicion. For instance, ability and occupational choice are mentioned as driving both the level of (entrepreneurial) income and of education. Using instrumental variables can provide a way out. However, three questions remain: whether endogeneity is really present, whether it matters and whether the selected instruments make sense. Using Bayesian methods, we find that the relationship between education and entrepreneurial income is indeed endogenous and that the impact of endogeneity on the estimated relationship between education and income is sizeable. We do so using family background variables and show that relaxing the strict validity assumption of these instruments does not lead to strongly different results. This is an important finding because family background variables are generally strongly correlated with education and are available in most datasets. Our approach is applicable beyond the field of returns to education for income. It applies wherever endogeneity suspicion arises and the three questions become relevant.Education, income, entrepreneurship, self-employment, endogeneity, instrumental variables, Bayesian analysis, family background variables

Labour productivity and profitability in the Dutch flower trade

This paper makes an attempt to illustrate the use of econometric models as frame of reference for diagnosing small firm performance. For this purpose, two models are developed explaining differences in labour productivity and profitability among Dutch flower exporters. In addition, we show how these models can be used for inter-firm performance comparisons

Market Disequilibria and Their Influence on Small Retail Store Pricing

In this paper a quantitative model is developed to explain differences in average store price levels. We assume that stores may operate under different economic regimes, that is, under excess capacity or excess demand. Prices are expected to be higher than average in case of an excess demand regime and lower in an excess capacity situation. Actual information regarding the regime that applies to each individual store is not available. Therefore, we propose to use a so-called 'switching model' with endogenous regime choice to analyse the store price differences. The model developed m the paper is estimated using four largely differing types of stores from the Durch retail trade. These samples consist mainly of small stores

A decade of research on the genetics of entrepreneurship: a review and view ahead

Studies analyzing the heritability of entrepreneurship indicate that explanations for why people engage in entrepreneurship that ignore genes are incomplete. However, despite promises that were solidly backed up with ex ante power calculations, atte