Educational attainment is a strong predictor of self-employment

15 01 2008

Educational level, prior military service, and household wealth are strong predictors of self-employment according to a working paper released by the Office of Advocacy of the U.S. Small Business Administration. The paper finds that individuals with prior military experience are up to 11% more likely to be self-employed, while educational level can increase the likelihood of self-employment by as much as 8.3%.

The paper’s author, Dr. Chad Moutray, noted that “we often talk about the importance of education to our own personal fulfillment and to the economy as a whole” but that the study shows that educational attainment is also a strong predictor of self-employment, with additional years of college significantly increasing the chance of being one’s own boss.  The paper, Educational Attainment and Other Characteristics of the Self-Employed: An Examination using Data from the Panel Study of Income Dynamics, analyzed data from the Panel Study of Income Dynamics (PSID) for 2003. The data set is unique as it tracks families (including adult children’s families) over time, beginning in 1968.  The findings include the fact that having some college education increases the chances of self-employment by 3.3% , a baccalaureate degree by 4.4% and graduate experience by 8.3%.

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One response

15 01 2008
Richard Hanage

I am pleased the author has used the word ‘predictors’. This is important as there may (or may not) be cause and effect. For instance, are people who are predisposed to self-employement more likely to go into military service, or the reverse? Does military service reduce ones opportunities for employment, so that these people are forced to become self-employed?
I worry about policy-makers who assume cause and effect with no evidence to support it.
It would be interesting to dig deeper to try and determine cause and effect so that policy can be truly evidence-based.
This is a general issue, of course, and not specific to this paper.

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