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Matthias Brachert, Walter Hyll, Abdolkarim Sadrieh
Entry into self-employment and individuals' risk-taking propensities
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.
JEL-Codes:D03, D81, J23, M13, L26
Keywords:Risk-taking propensity, Entry into self-employment, German Socio-Economic Panel (SOEP)
Forschungsbereich:Arbeitsmarktökonomie, Einkommen und soziale Sicherheit
Sprache:Englisch