Monday, May 23, 2011

Entrepreneurs need an educated workforce

Entrepreneurship is the driver of growth and wealth, or at least an important driver. This is why so many initiatives are geared towards making life easier for entrepreneurs. And the champion in the US, with relatively little red tape, low taxes and especially very developed financial markets. One aspect that is much discussed right now is how low these taxes should be, especially as lowering them implies reducing some public benefits such as education. Is there a trade-off?

José María Millán, Emilio Congregado, Concepción Román, Mirjam van Praag and André van Stel use a panel dataset from several European countries to show that education matters for entrepreneurial performance, and it is not only the entrepreneur's own education, but also that of the workforce. An entrepreneur who cannot find appropriate workers or clients who are sophisticated enough for her products is not as successful. While the results are strong, I am a bit wary of using a short annual sample to tease anything out of education measures, but this is worth further investigation.

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