The Right Stuff? Personality and Entrepreneurship

65 Pages Posted: 17 Sep 2018

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

University of Delhi

Multiple version iconThere are 2 versions of this paper

Date Written: September 2018

Abstract

We construct a structural model of entry into self-employment to evaluate the impact of policies supporting entrepreneurship. Previous work has recognized that workers may opt for self-employment due to the non-pecuniary benefits of running a business and not necessarily because they are good at it. Other literature has examined how socio-emotional skills, such as personality traits, affect selection into self-employment. We link these two lines of inquiry. The model we estimate captures three factors that affect selection into self-employment: credit constraints, relative earnings and preferences. We incorporate personality traits by allowing them to affect sector-specific earnings as well as preferences. The estimated model reveals that the personality traits that make entrepreneurship profitable are not always the same traits driving people to open a business. This has important consequences for entrepreneurship policies. For example, subsidies for small businesses do not attract talented-but-reluctant entrepreneurs, but instead attract individuals with personality traits associated with strong preferences for running a business and low-quality business ideas.

Suggested Citation

Hamilton, Barton H. and Papageorge, Nicholas W. and Pande, Nidhi, The Right Stuff? Personality and Entrepreneurship (September 2018). NBER Working Paper No. w25006. Available at SSRN: https://ssrn.com/abstract=3246829

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
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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

University of Delhi

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