The Long-Term Effects of External Examinations on Entrepreneurship: Evidence from Global Entrepreneurship Monitor

Abstract

Previous research has found that external examinations positively affect human capital. Still, critics warn that such examinations inhibit the development of skills crucial to entrepreneurship. Using the Global Entrepreneurship Monitor dataset and exploiting variation in examination types at the end of secondary school within countries and over time, we find that external examinations have positive long-term effects on entrepreneurship. An instrumental variables strategy confirms this relationship. However, the positive effect is heterogeneous and fades away as a country approaches the world technology frontier. External examinations benefit entrepreneurship by promoting risk acceptance, skill and opportunity perception, personal networks, and entrepreneurial intentions.