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 Department 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 or http://dx.doi.org/10.2139/ssrn.2157986

Christopher J. Dawson (Contact Author)

Swansea University ( email )

Singleton Park
Swansea, SA2 8PP
United Kingdom

David Emmanuel De Meza

London School of Economics Department 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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