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Risk Taking by Entrepreneurs

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  • Hugo A. Hopenhayn

    ()
    (University of Rochester)

  • Galina Vereshchagina

    ()
    (CERGE-EI)

Abstract

Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest into risky projects offering no risk premium. The model has also a number of implications for firm dynamics supported by empirical evidence, such as a positive correlation between survival, size, and firm age.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_500.pdf
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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 500.

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Length: 34 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:roc:rocher:500

Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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Keywords: occupational choice; risk taking; firm dynamics; borrowing constraints.;

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References

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