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Entry into self-employment and individuals’ risk-taking propensities

Author

Listed:
  • Matthias Brachert

    (Halle Institute for Economic Research)

  • Walter Hyll

    (Danube University Krems and Statistics Austria)

  • Abdolkarim Sadrieh

    (University of Magdeburg)

Abstract

Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.

Suggested Citation

  • Matthias Brachert & Walter Hyll & Abdolkarim Sadrieh, 2020. "Entry into self-employment and individuals’ risk-taking propensities," Small Business Economics, Springer, vol. 55(4), pages 1057-1074, December.
  • Handle: RePEc:kap:sbusec:v:55:y:2020:i:4:d:10.1007_s11187-019-00173-6
    DOI: 10.1007/s11187-019-00173-6
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    More about this item

    Keywords

    Risk-taking propensity; Entry into self-employment; German Socio-Economic Panel (SOEP);
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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