Wim P. M. Vijverberg

Education and Entrepreneurship Selection and Performance: A Review of the Empirical Literature

This paper provides a review of empirical studies into the impact of formal schooling on entrepreneurship selection and performance in industrial countries. We describe the main effects found in the literature, we explain the variance in results across almost a hundred studies, and we put the empirical results in the context of related economic theory and the much further developed literature in labor economics (studying the rate of return to education among wage employees). Five main conclusions result from this meta-analysis. First, the impact of education on selection into entrepreneurship is insignificant. Second, the effect of education on performance is positive and significant. Third, the return to a marginal year of schooling is 6.1% for an entrepreneur. Fourth, the effect of education on earnings is smaller for entrepreneurs than for employees in Europe, but larger in the USA. Fifth, the returns to schooling in entrepreneurship are higher in the USA than in Europe, higher for females than for males, and lower for non-whites or immigrants. In conclusion, we offer a number of suggestions to move the research frontier in this area of inquiry. The entrepreneurship literature on education can benefit from the technical sophistication used to estimate the returns to schooling for employees.

Schooling, Family Background, and Adoption: Is it Nature or is it Nurture?

When parents are more educated, their children tend to receive more schooling as well. Does this occur because parental ability is passed on genetically or because more educated parents provide a better environment for children to flourish? Using an intergenerational sample of families, we estimate on the basis of a comparison of biological and adopted children that about 55–60 percent of the parental ability is genetically transmitted.

A Switching Regression Model for Wage Determinants in the Public and Private Sectors of a Developing Country

Governments in less developed countries face severe budgetary constraints. Given that public sector employment is a large part of modern sector employment, the government wage bill h as come under increased scrutiny. The central question is how do gove rnment wages compare with those in the private sector? In this paper, the authors develop and estimate a model to answer this question. An important aspect of this model is the endogenous treatment of sector choice. The estimation results (full information maximum likelihood) sound a strong warning against the use of ordinary least squares est imates that are based on sector-specific samples. Data are from the I vory Coast. Copyright 1988 by MIT Press.

The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis

Abstract This paper represents treaty participation as a two-stage game, for which nations first decide whether or not to participate and then they choose their level of participation. The resulting subgame perfect equilibrium is used to derive a reduced-form equation for estimating and separating the influences of the variables at the two decision stages. This spatial probit equation forms the basis for a full-information maximum likelihood estimator that accounts for the simultaneity bias associated with public good spillins at both stages. When the procedure is applied to the Helsinki Protocol, we find that the strategic influence of a variable may drastically differ depending upon which stage is scrutinized.

Why Cooperate? Public Goods, Economic Power, and the Montreal Protocol

This paper develops a correlated probit model to describe dichotomous choices that may contain a public-goods component or some other forms of interdependency. The key contribution of the paper is to formulate tests for interdependent behavior among agents. In particular, we examine the decisions by nations whether or not to ratify the Montreal Protocol on Substances that Deplete the Ozone Layer. Specifically, we reject free riding as a motive for not ratifying the Protocol, and we find little evidence that individual nations were influenced by the behavior of their largest trading partners. Hence, the data suggest that, with respect to the Montreal Protocol, most nations acted without regard for the actions of other nations.

Probit in a Spatial Context: A Monte Carlo Analysis

Data are often observed in a binary form: vote for or vote against; buy or don’t buy; build or don’t build; move or don’t move, etc. In classical econometrics this situation has been extensively studied and appropriate procedures developed to handle the nature of the data. The standard model however does not allow for spatial processes to drive the choices made by decision makers. For example, whether one city increases its sales tax may depend the actions of neighboring cities. Whether one jurisdiction subsidizes the construction of a new sports arena depends on the options that are offered to the sports enterprise by other jurisdictions — which has been occurring with increasing frequency in the United States, at the threat of the team moving elsewhere. In both of these cases, the conventional probit model fails to account for interdependencies.

Monte Carlo evaluation of multivariate normal probabilities

Abstract This paper extends research on the simulation of multivariate normal probabilities of high-order dimension by developing a new family of simulators. Such simulators are useful for models with limited dependent variables, including multinomial probit, in panel studies, spatial analysis, and time series analysis. The simulators are derived from a Cholesky decomposition of the covariance matrix, combined with a suitable choice of an importance sampling distribution. The paper studies, among others, the impact of antithetical sampling. The insights gained in this paper are of use in Bayesian analysis as well, in the evaluation of posterior densities.

Public Capital And Private Productivity

This paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity. The juxtaposition of approaches removes the variability in estimates due to dissimilar variable definitions and econometric methodologies. Estimates are based on U.S. time-series data and are evaluated by the implied elasticities of substitution, the prediction of labor productivity trends, and the impact of public capital on productivity. As the three approaches yield very different estimates, it will be hard to ever settle the debate about the effect of public capital on private productivity.

Measuring the unidentified parameter of the extended Roy model of selectivity

Abstract In the extended Roy model of selectivity, the correlation coefficient between the disturbance terms in the two equations that are subject to selectivity is treated in the current literature as an unidentified parameter. This paper develops a method to produce a probabilistic statement about this parameter, which is of great interest for both theoretical and descriptive reasons. The method is illustrated with three examples drawn from published research.

A Switching Regression Model of Public-Private Sector Wage Differentials in Peru: 1985-86

This article examines the combined impact of the employment guarantee for graduates and public sector compensation policies on the Egyptian labor market. Besides contributing to an unsustainable rate of growth in the government labor force, these ...