Entrepreneurship: cause and consequence of financial optimism

Chris Dawson (), David de Meza, Andrew Henley and Reza (Gholamreza) Arabsheibani ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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.

Keywords: Financial optimism; expectations; self-employment (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Date: 2014-10-25
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Citations: View citations in EconPapers (31)

Published in Journal of Economics and Management Strategy, 25, October, 2014, 23(4), pp. 717-742. ISSN: 1058-6407

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Related works:
Journal Article: Entrepreneurship: Cause and Consequence of Financial Optimism (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:65276

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