Curb Your Enthusiasm: Optimistic Entrepreneurs Earn Less

Christopher Dawson, David de Meza, Andrew Henley, Reza Arabsheibani

Research output: Contribution to journalArticle

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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.
Original languageEnglish
Pages (from-to)53-69
Number of pages17
JournalEuropean Economic Review
Volume111
Early online date26 Sep 2018
DOIs
Publication statusPublished - 1 Jan 2019

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Entrepreneurs
Optimism
Employees
Self-employment
Psychological
Intrinsic
Owners
Income
External validity

Keywords

  • Financial optimism, expectations, entrepreneurs

Cite this

Curb Your Enthusiasm: Optimistic Entrepreneurs Earn Less. / Dawson, Christopher; de Meza, David; Henley, Andrew; Arabsheibani, Reza.

In: European Economic Review, Vol. 111, 01.01.2019, p. 53-69.

Research output: Contribution to journalArticle

Dawson, Christopher ; de Meza, David ; Henley, Andrew ; Arabsheibani, Reza. / Curb Your Enthusiasm: Optimistic Entrepreneurs Earn Less. In: European Economic Review. 2019 ; Vol. 111. pp. 53-69.
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