Year: 2019
Type: article
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 nonpecuniary 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.
Source: Quantitative Economics
DOI: 10.3982/qe748
Institutions: University of Delhi, Georgia Institute of Technology, Johns Hopkins University, IZA - Institute of Labor Economics, Hong Kong University of Science and Technology, Washington University in St. Louis, University of Cambridge, University College London, National Bureau of Economic Research
Language: English
Subfield: Management of Technology and Innovation
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4243749033