Entrepreneurship Selection and Performance: A Meta-analysis of the Impact of Education in Less Developed Countries

This paper provides an analytical review of empirical studies into the impact of schooling on entrepreneurship selection and performance in less developed countries. We analyze the variation of this impact across countries, estimation methods, definition of entry and performance, and the use of control variables. We find that one year of schooling raises enterprise income by an average of 5 percent, which is closely similar to the average return in industrial countries. The return varies by gender, rural/urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment but also prefer nonfarm entrepreneurship to farming. The education effect that separates workers from self-employment into wage employment is stronger for women, possibly stronger in urban areas, and also stronger in less developed economies where agriculture is more dominant and literacy rates are lower.