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

Dell’Era, Michele, Luca David Opromolla () and Luis Santos-Pinto ()
Authors registered in the RePEc Author Service: Michele Dell'Era ()

No 13225, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 off. 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: entrepreneurship; General Equilibrium; Optimism (search for similar items in EconPapers)
JEL-codes: D50 H21 J24 L26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-lma, nep-mac and nep-sbm
Date: 2018-10
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Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018) Downloads
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018) Downloads
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018) Downloads
Working Paper: A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability (2018) Downloads
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