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 InfoPaper provided by Department of Economics, Florida State University in its series Working Papers with number wp2008_11_02.
Date of creation: Aug 2007
Date of revision: Oct 2008
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-DEV-2008-12-07 (Development)
- NEP-ENT-2008-12-07 (Entrepreneurship)
- NEP-UPT-2008-12-07 (Utility Models & Prospect Theory)
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- Schneck, Stefan, 2011.
"The Effect of Relative Standing on Considerations About Self-Employment,"
Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover
dp-486, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- 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).
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