Risk aversion and entrepreneurship under uncertainty: Further results

Kit Pong Wong

Economics Letters, 2023, vol. 230, issue C

Abstract: The extant literature has shown that (i) the positive relation between assets and the rate of business startups and (ii) the increase in the relative return to risky entrepreneurship for the marginal individual when his assets increase are both driven by risk preferences that exhibit decreasing absolute risk aversion (DARA). In this paper, we contribute to the theory of entrepreneurship under uncertainty by proving that DARA is not only sufficient but also necessary for these two results. DARA as such plays an essential role for the understanding of the occupational choice between risky entrepreneurship (self-employment) and secure employment when uncertainty prevails.

Keywords: DARA; Entrepreneurship; Risk aversion (search for similar items in EconPapers)
JEL-codes: D81 L26 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:230:y:2023:i:c:s0165176523002732

DOI: 10.1016/j.econlet.2023.111248

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