Entrepreneurship: Cause or Consequence of Financial Optimism?
51 Pages Posted: 6 Oct 2012
Date Written: October 6, 2012
Extant evidence that the self-employed overestimate their returns by more than employees do is consistent with two mutually inclusive possibilities. Self-employment may generate optimism or optimists may be drawn to self-employment. This paper finds that employees who will be self-employed in the future overestimate their short-run financial wellbeing by more than those who never become self-employed. When actually self-employed they are even more optimistic. Employees aspiring to start their own business are also of above average optimism. Cross-sectional findings are therefore an amalgam of psychological disposition and environmental factors, as theory requires if optimism is to be a causal influence on entrepreneurship.
Keywords: financial optimism, expectations, self-employment
JEL Classification: D84, M13
Suggested Citation: Suggested Citation