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Self-Employment and Risk Preference

Brown, S., Dietrich, M., Ortiz, A. and Taylor, K. (2007) Self-Employment and Risk Preference. Working Paper. Department of Economics, University of Sheffield ISSN 1749-8368

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Abstract

We explore the relationship between self-employment and attitudes towards financial risk using individual level data drawn from the U.S. Survey of Consumer Finances (SCF) and the U.S. Panel Study of Income Dynamics (PSID). Both surveys include questions, which enable us to construct measures of an individual´s willingness to take risk allowing us to explore the implications of interpersonal differences in risk preference for the probability and success of self-employment. Our empirical findings suggest that willingness to take financial risk is positively associated with both the incidence and success of self-employment. We find that this relationship is particularly pronounced in cases where the individual actually started the business. Finally, we exploit the panel aspect of the PSID and find evidence consistent with a causal relationship between attitudes towards risk and self-employment with attitudes towards risk measured over 1969-1972 (i.e. prior to becoming self-employed) having a statistically significant positive influence on the probability of self-employment in 1996.

Item Type: Monograph (Working Paper)
Copyright, Publisher and Additional Information: The Sheffield Economics Research Paper (SERP) series offers a forum for the research output of the academic staff and research students of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by a departmental editor. However, the contents and opinions expressed remain the responsibility of the authors. All papers may be downloaded free on the understanding that the contents are preliminary and therefore permission from the author(s) should be sought before they are referenced.
Keywords: Business Performance, Risk Preference, Self-Employment
Institution: The University of Sheffield
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) > Sheffield Economics Research Papers Series
Depositing User: Repository Officer
Date Deposited: 21 Oct 2009 16:12
Last Modified: 19 Jun 2014 09:45
Published Version: http://www.shef.ac.uk/economics/research/serps/yea...
Status: Published
Publisher: Department of Economics, University of Sheffield
Identification Number: Sheffield Economic Research Paper Series 2007007
URI: http://eprints.whiterose.ac.uk/id/eprint/9965

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