Entry into self-employment and individuals’ risk-taking propensities

Matthias Brachert (), Walter Hyll () and Abdolkarim Sadrieh
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Matthias Brachert: Halle Institute for Economic Research
Walter Hyll: Danube University Krems and Statistics Austria

Small Business Economics, 2020, vol. 55, issue 4, No 11, 1057-1074

Abstract: Abstract Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.

Keywords: Risk-taking propensity; Entry into self-employment; German Socio-Economic Panel (SOEP) (search for similar items in EconPapers)
JEL-codes: D03 D81 J23 L26 M13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11187-019-00173-6

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