The Right Stuff? Personality and Entrepreneurship

57 Pages Posted: 20 May 2014

See all articles by Barton H. Hamilton

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business

Nicholas W. Papageorge

Johns Hopkins University Department of Economics

Nidhi Pande

TERI University

Multiple version iconThere are 2 versions of this paper

Date Written: May 19, 2014

Abstract

A puzzling feature of entrepreneurship is that many individuals are self-employed even though they would earn more in paid employment. To shed light on this puzzle, we examine the role of personality traits in determining entrepreneurial decisions and earnings. We estimate a model in which agents maximize expected utility by choosing between self and paid employment. We allow personality traits to affect earnings in each sector along with underlying preferences over sectors. We find that the personality traits that make entrepreneurship profitable are not always the same personality traits that drive people to open their own business. This means that, in terms of personality traits, individuals who would be the highest earning entrepreneurs are not always the individuals who choose to be entrepreneurs. We go on to use the estimated model to assess various policies designed to encourage entrepreneurship. In general, we find that these policies either subsidize businesses that would have been started without a subsidy or that they attract individuals with personality traits associated with preferences for entrepreneurship, but who have low-quality business ideas.

Keywords: Entrepreneurship, Personality, Non-cognitive skills, Latent factors

JEL Classification: J23, J24, J31, J32

Suggested Citation

Hamilton, Barton H. and Papageorge, Nicholas W. and Pande, Nidhi, The Right Stuff? Personality and Entrepreneurship (May 19, 2014). Available at SSRN: https://ssrn.com/abstract=2438944 or http://dx.doi.org/10.2139/ssrn.2438944

Barton H. Hamilton (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive, Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-8057 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/hamiltonb/

Nicholas W. Papageorge

Johns Hopkins University Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Nidhi Pande

TERI University ( email )

New Delhi
India

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