Entrepreneurship: Cause or Consequence of Financial Optimism?

51 Pages Posted: 6 Oct 2012

See all articles by Christopher J. Dawson

Christopher J. Dawson

Swansea University

David de Meza

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management

Andrew Henley

Cardiff Business School, Cardiff University; IZA Institute of Labor Economics

G. Reza Arabsheibani

Swansea University - School of Business and Economics; IZA Institute of Labor Economics

Date Written: October 6, 2012

Abstract

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

Dawson, Christopher J. and de Meza, David Emmanuel and Henley, Andrew and Arabsheibani, G. Reza, Entrepreneurship: Cause or Consequence of Financial Optimism? (October 6, 2012). IZA Discussion Paper No. 6844, Available at SSRN: https://ssrn.com/abstract=2157986

Christopher J. Dawson (Contact Author)

Swansea University ( email )

Singleton Park
Swansea, SA2 8PP
United Kingdom

David Emmanuel De Meza

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Andrew Henley

Cardiff Business School, Cardiff University ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

G. Reza Arabsheibani

Swansea University - School of Business and Economics ( email )

Singleton Park
Swansea, Wales SA2 8PP SA2 8PP
United Kingdom
+44 (0) 1792 513682 (Phone)
+44 (0) 1792 295872 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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