Investing in education obviously has many benefits, but research from Iowa State suggests that it has the unexpected benefit of boosting entrepreneurship, especially among women.
“The benefits of education are often debated. Some worry it’s mostly about signaling rather than skill development, but our study provides a piece of evidence that additional years of education after high school can boost self-employment in high-growth industries,” the authors explain.
Boosting entrepreneurship
The researchers developed an economic model based on data from the U.S. Census Bureau’s American Community Survey, which covered around 8.2 million people born between 1963 and 1990. The profiles were spliced by state and birth year to enable them to understand the link between education and self-employment rates.
They also categorized industries according to their rate of growth by gathering data on employment growth in industries between 2006 and 2019.
“Some of the high growth industries are what we’d expect: e-commerce and computer and data processing services. But they also included child care, veterinary services, and newer sub-industries in health, education and social services that emerged with smartphones and the explosion of apps,” the authors explain.
Among the low-growth sectors were trucking, food processing, and grocery retailing, with the likes of electronics, automobiles, and manufacturing in general shrinking, alongside retailers who sold things like music and movies.
Education matters
The data revealed that additional education seemed to result in higher levels of self-employment in high-growth sectors, with this the case for both men and women. It also prompted more entrepreneurship in low-growth sectors for women, however.
“Essentially, more education shifted the overall number of self-employed men from shrinking and low-to-medium-growth industries to high-growth industries. For women, more education increased self-employment overall,” the researchers explain.
They go on to suggest that the difference observed between men and women might be due to confidence. They highlight that many new businesses fail, so confidence in one’s venture is crucial. Higher education can also further enhance the prospects of someone with high confidence levels.
“Education is empowering. For men who are overconfident, additional schooling may not affect their confidence much, but it can provide skills to help them in more productive and higher growth industries. For women, education may have an even greater impact on encouraging them to jump into entrepreneurship by increasing their confidence in addition to their skills,” the authors conclude.
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