Risk aversion, downside risk aversion, and the transition to entrepreneurship

Claudio Bonilla and Marcos Vergara
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Marcos Vergara: Universidad del Desarrollo

Theory and Decision, 2021, vol. 91, issue 1, No 5, 123-133

Abstract: Abstract In this paper, we discuss the transition from secure employment to risky self-employment (entrepreneurship) caused by a small increase in wealth. Building on the apportioning risk literature, we prove that the transition from secure employment to risky entrepreneurship is based on a measure of the difference between the strength of downside risk aversion and the strength of risk aversion. This result highlights the idea that using the behavioral approach of risky lotteries to study entrepreneurship can produce different results from the traditional economic theory of entrepreneurship, which can have policy implications that must be considered with caution.

Keywords: Apportioning risk; Entrepreneurship; Downside risk aversion (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11238-020-09786-w

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