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Curb your enthusiasm: optimistic entrepreneurs earn less

Dawson, Christopher, de Meza, David, Henley, Andrew and Arabsheibani, G. Reza (2019) Curb your enthusiasm: optimistic entrepreneurs earn less. European Economic Review, 111. pp. 53-69. ISSN 0014-2921

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Identification Number: 10.1016/j.euroecorev.2018.08.007

Abstract

This paper concerns the implications of biased beliefs on entrepreneurial earnings. Amongst self-employed business owners, income is decreasing in optimism measured whilst still an employee. Controlling for earnings in paid employment, self-employment earnings of those with optimism above the mean are some 30% less than those with optimism below the mean. For employees, it is optimists that have higher earnings. These and associated results suggest that mistaken expectations lead to entry errors. As a test of external validity, future divorcees turn out to be financial optimists, indicating our measure captures an intrinsic psychological trait associated with rash decisions.

Item Type: Article
Official URL: https://www.journals.elsevier.com/european-economi...
Additional Information: © 2018 Elsevier B.V.
Divisions: Management
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M13 - Entrepreneurship
Sets: Departments > Management
Collections > Economists Online
Date Deposited: 26 Sep 2018 10:19
Last Modified: 20 Oct 2021 01:29
URI: http://eprints.lse.ac.uk/id/eprint/90264

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