Entrepreneurial returns to education in Zambia: formal education versus vocational training

Purpose – This study aims to analyse informal sector returns to formal education, vocational training and prior knowledge in entrepreneurship in Zambia. It estimates and compares the effect of these three forms of education on entrepreneurship choice and success. Additionally, the study examines how poor health influences income potential and participation in the informal sector. Design/methodology/approach – The study uses Zambia’s 2022 Labour Force Survey data and uses a quantile regression sample selection method to address sample selection bias and individual heterogeneity. The study includes health condition variables as key elements of human capital. The study estimates a two-equation model: one for entrepreneurship participation (selection equation) and another for entrepreneurial income (outcome equation). Findings – The study finds that formal education, vocational education and prior entrepreneurship knowledge all influence the choice to become an entrepreneur in Zambia, with formal education having the strongest effect. Returns to education increase across the income distribution, with formal education yielding the highest returns. Additionally, poor health negatively affects income potential and informal sector participation. Originality/value – This study focuses on the often-overlooked informal sector returns to education, contrasting with previous research that has focused primarily on wage sector returns. By incorporating the health dimension into human capital, the study offers new insights into how education benefits entrepreneurs and how health influences their income and participation in the informal sector.