Entrepreneurship: cause and consequence of financial optimism
Extant evidence that the self-employed overestimate their returns by a greater margin than employees is consistent with two mutually inclusive possibilities. Self-employment may foster optimism or intrinsic optimists may be drawn to self-employment. Previous research is generally unable to disentangle these effects because of reliance on cross-sectional data. Using longitudinal data, this paper finds that employees who will be self-employed in the future overestimate their short-term financial wellbeing by more than those who never become self-employed. Optimism is higher still when self-employed. These results suggest that the greater optimism of the self-employed reflects both psychological disposition and environmental factors. By providing greater scope for optimism, self-employment entices the intrinsically optimistic.
|Date of creation:||25 Oct 2014|
|Publication status:||Published in Journal of Economics and Management Strategy, 25, October, 2014, 23(4), pp. 717-742. ISSN: 1058-6407|
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