Advanced Search
MyIDEAS: Login to save this article or follow this journal

Entrepreneurship and Risk Aversion

Contents:

Author Info

  • Kamhon Kan
  • Wei-Der Tsai

    ()

Abstract

Evans and Jovanovic (1989, Journal of Political Economy 97(4), 808–827) find that wealth is an important determinant of business startups due to liquidity constraints. However, Cressy (2000, Economic Letters 66, 235–240) argues that if risk aversion is a negative function of wealth, Evans and Jovanovic’s empirical results could be spurious and the positive effect of wealth could be due to the omission of risk aversion in the regression equation. In other words, according to Cressy, one’s wealth does not have any effect on business startups once the degree of risk aversion is accounted for. This paper attempts to investigate the validity of Cressy’s conjecture. We empirically examine the effect of wealth on the transition into self-employment, while allowing for the effect of risk aversion. Our empirical findings show that Evans and Jovanovic’s (1989) results are robust, i.e., wealth has a positive effect on business startups even allowing for the confounding effects of risk aversion. Copyright Springer 2006

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s11187-005-5603-7
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 26 (2006)
Issue (Month): 5 (06)
Pages: 465-474

as in new window
Handle: RePEc:kap:sbusec:v:26:y:2006:i:5:p:465-474

Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100338

Related research

Keywords: business startup; liquidity constraints; self-employment;

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cressy, Robert, 2000. "Credit rationing or entrepreneurial risk aversion? An alternative explanation for the Evans and Jovanovic finding," Economics Letters, Elsevier, vol. 66(2), pages 235-240, February.
  2. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
  3. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  4. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Entrepreneurial Decisions and Liquidity Constraints," NBER Working Papers 4526, National Bureau of Economic Research, Inc.
  5. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  6. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  7. Blanchflower, David G & Meyer, Bruce D, 1994. " A Longitudinal Analysis of the Young Self-Employed in Australia and the United States," Small Business Economics, Springer, vol. 6(1), pages 1-19, February.
  8. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
  9. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  10. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-26, November.
  11. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  12. Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 769-97, August.
  13. van Praag, C M & Cramer, J S, 2001. "The Roots of Entrepreneurship and Labour Demand: Individual Ability and Low Risk Aversion," Economica, London School of Economics and Political Science, vol. 68(269), pages 45-62, February.
  14. Taylor, Mark P, 1999. "Survival of the Fittest? An Analysis of Self-Employment Duration in Britain," Economic Journal, Royal Economic Society, vol. 109(454), pages C140-55, March.
  15. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-70, September.
  16. Fairlie, Robert, 2014. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Santa Cruz Department of Economics, Working Paper Series qt49c4n0fg, Department of Economics, UC Santa Cruz.
  17. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
  18. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:26:y:2006:i:5:p:465-474. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.