Relative Wealth Concerns and Entrepreneurship
AbstractWe develop a model of occupational choice and entrepreneurship in the presence of relative wealth concerns. A concern for relative standing arises even though individuals care only about consumption of standard commodities. We assume that entrepreneurial returns are not diversifiable, which results in less entrepreneurship than would be the case with complete markets. Relative wealth concerns are shown to lead to an increase in entrepreneurship and risk-taking, mitigating this difficulty substantially. When we change the profile of the economy to include more risk-averse people, we find that there is a greater increase in entrepreneurship. We examine the effects of uncertainty about economic policies such as market-based reforms on entrepreneurship.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 78 (2011)
Issue (Month): 310 (04)
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Other versions of this item:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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- Stefan Schneck, 2011.
"The Effect of Relative Standing on Considerations about Self-Employment,"
SOEPpapers on Multidisciplinary Panel Data Research
426, DIW Berlin, The German Socio-Economic Panel (SOEP).
- Schneck, Stefan, 2011. "The Effect of Relative Standing on Considerations About Self-Employment," Hannover Economic Papers (HEP) dp-486, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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