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Overoptimistic Entrepreneurs:Predicting Wellbeing Consequences of Self-Employment

Author

Listed:
  • Reto Odermatt

    (University of Basel)

  • Nattavudh Powdthavee

    (Warwick Business School)

  • Alois Stutzer

    (University of Basel)

Abstract

The formation of expectations is a fundamental part of the process when people decide about engaging in an entrepreneurial venture. We evaluate the accuracy of newly self-employed people's predictions of their overall future wellbeing. Based on individual panel data for Germany, we find that they are overly optimistic when we compare their predicted life satisfaction with their actual life satisfaction five years later on. This overoptimism also holds for those entrepreneurs who successfully remain in business for at least five years. A possible reason might be that they underestimate the heavy workload reflected in higher working hours than desired and the drop in leisure satisfaction.

Suggested Citation

  • Reto Odermatt & Nattavudh Powdthavee & Alois Stutzer, 2017. "Overoptimistic Entrepreneurs:Predicting Wellbeing Consequences of Self-Employment," PIER Discussion Papers 71, Puey Ungphakorn Institute for Economic Research, revised Oct 2017.
  • Handle: RePEc:pui:dpaper:71
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Adaptation; Overoptimism; Life Satisfaction; Projection Bias; Wellbeing; Selfemployed;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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