Risk Preference and Entrepreneurial Investment at the Top of the Wealth Distribution
Johannes König () and
Carsten Schröder ()
Additional contact information
Johannes König: DIW Berlin
No 13951, IZA Discussion Papers from Institute of Labor Economics (IZA)
We present first evidence how individual risk preferences shape entrepreneurial investment among the very wealthy using novel survey data from the top of the wealth distribution, which have been added to the 2019 German Socio-economic Panel Study. The data include private wealth balance sheets, in particular the value of own private business assets, and a standard measure of risk tolerance. We find that wealthy individuals are more likely to be entrepreneurs and invest a larger share of their wealth in their own businesses when they are more willing to take risks. These associations are stronger among wealthy than among less wealthy individuals. The results imply that policies affecting the riskiness of income and wealth, such as tax policy and bankruptcy law, affect risky investment decisions at the top of the wealth distribution in ways strongly determined by individual risk tolerance. Since the wealthy dominate aggregate risky investment, their risk preferences must be taken into account for theory development, empirical analysis, and policy evaluations.
Keywords: wealth; entrepreneurship; risk; portfolio choice (search for similar items in EconPapers)
JEL-codes: D14 J22 J23 L26 (search for similar items in EconPapers)
Pages: 26 pages
New Economics Papers: this item is included in nep-ent, nep-eur, nep-lma and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Risk Preference and Entrepreneurial Investment at the Top of the Wealth Distribution (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp13951
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().