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Curb your enthusiasm: optimistic entrepreneurs earn less

de Meza, David, Dawson, Christopher, Henley, Andrew ORCID: and Arabsheibani, G. Reza 2019. Curb your enthusiasm: optimistic entrepreneurs earn less. European Economic Review 111 , pp. 53-69. 10.1016/j.euroecorev.2018.08.007

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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
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Publisher: Elsevier
ISSN: 0014-2921
Date of First Compliant Deposit: 12 September 2018
Date of Acceptance: 30 August 2018
Last Modified: 13 Nov 2023 10:00

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