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Self-employment and attitudes towards risk: Timing and unobserved heterogeneity

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Author Info

  • Brown, Sarah
  • Dietrich, Michael
  • Ortiz-Nuñez, Aurora
  • Taylor, Karl

Abstract

We explore the relationship between self-employment and attitudes towards financial risk using individual level data drawn from the US Panel Study of Income Dynamics (PSID), which includes measures of individuals' attitudes towards hypothetical gambles allowing us to explore the implications of interpersonal differences in risk attitudes for the probability of self-employment. Our empirical findings suggest that willingness to take financial risk is positively associated with self-employment. By exploiting the panel aspect of the PSID, we find evidence, whilst controlling for unobserved individual heterogeneity, consistent with a causal relationship between attitudes towards risk and self-employment with attitudes towards risk measured prior to becoming self-employed having a statistically significant positive influence on the probability of future self-employment.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 32 (2011)
Issue (Month): 3 (June)
Pages: 425-433

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Handle: RePEc:eee:joepsy:v:32:y:2011:i:3:p:425-433

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Web page: http://www.elsevier.com/locate/joep

Related research

Keywords: Risk attitudes Self-employment;

References

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  13. Robert W. Fairlie, 2002. "Drug Dealing and Legitimate Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 538-567, July.
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  15. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
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Cited by:
  1. Maart, Syster Christin & Musshoff, Oliver & Ewald, Jorn, 2012. "Ermittlung Der Individuellen Risikoeinstellung: Vergleich Verschiedener Methoden Und Personengruppen," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137384, German Association of Agricultural Economists (GEWISOLA).
  2. Chihmao Hsieh & Simon C. Parker & C. Mirjam van Praag, 2011. "Risk, Balanced Skills and Entrepreneurship," Tinbergen Institute Discussion Papers 11-178/3, Tinbergen Institute.
  3. Dawson, Christopher & Henley, Andrew, 2012. "Gender, Risk and Venture Creation Intentions," IZA Discussion Papers 6947, Institute for the Study of Labor (IZA).

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