A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability

Michele Dell'Era (michele.dellera@edcparis.edu), Luca David Opromolla and Luis Santos-Pinto (luispedro.santospinto@unil.ch)
Additional contact information
Luis Santos-Pinto: Banco de Portugal

No 111, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: This paper studies the impact of optimism on occupational choice using a general equilibrium framework. The model shows that optimism has four main qualitative effects: it leads to a misallocation of talent, drives up input prices, raises the number of entrepreneurs, and makes entrepreneurs worse o . We calibrate the model to match U.S. manufacturing data. This allows us to make quantitative predictions regarding the impact of optimism on occupational choice, input prices, the returns to entrepreneurship,and output. The calibration shows that optimism can explain the empirical puzzle of the low mean returns to entrepreneurship compared to average wages.

Keywords: General Equilibrium; Entrepreneurship; Optimism (search for similar items in EconPapers)
JEL-codes: D50 H21 J24 L26 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018-10, Revised 2018-10
New Economics Papers: this item is included in nep-ent, nep-lma and nep-sbm
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Citations: View citations in EconPapers (1)

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https://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_111.pdf First version, 2018 (application/pdf)

Related works:
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018)
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018)
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018)
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018)
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