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Living Forever: Entrepreneurial Overconfidence at Older Ages

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  • Rietveld, C.A.
  • Groenen, P.J.F.
  • Koellinger, Ph.D.
  • van der Loos, M.J.H.M.
  • Thurik, A.R.

Abstract

Overconfidence has been proposed as an explanation for excess market entry by entrepreneurs and low returns in entrepreneurial activities. However, establishing that entrepreneurs are more overconfident than non-entrepreneurs requires the use of representative population samples; in addition, econometric endogeneity issues in survey data must be addressed. To overcome these methodological challenges, we use a measure of overconfidence that employs self-reports of life expectancy. These self-reports are compared to actual life spans in a large sample of the US population. We show that entrepreneurs are indeed more overconfident than non-entrepreneurs. By using fixed-effects panel regression—and thus by exploiting the longitudinal nature of our data—we provide evidence that changes in entrepreneurial status are not associated with changes in subjective life expectancy. These two findings in combination offer evidence that overconfident individuals self- select into entrepreneurship.

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Bibliographic Info

Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam in its series ERIM Report Series Research in Management with number ERS-2013-012-STR.

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Date of creation: 23 Jul 2013
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Handle: RePEc:ems:eureri:40673

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Postal: RSM Erasmus University & Erasmus School of Economics, PoBox 1738, 3000 DR Rotterdam
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Keywords: entrepreneurship; life expectancy; overconfidence; selection; self-employment;

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References

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Cited by:
  1. Kambiz Talebi & Pouria Nouri & Abdolah Ahmadi Kafeshani, 2014. "Identifying the main Individual Factors Influencing Entrepreneurial Decision making Biases: A Qualitative Content Analysis Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(8), pages 1-11, August.

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