This paper investigates the impact of risk attitudes on the decision to become an entrepreneur. In contrast to previous research, we handle endogeneity issues relying on an instrumental variables strategy considering as a source of exogenous variation in risk aversion the early exposure to a massive earthquake. Using several waves of the Bank of Italy Survey of Household Income and Wealth (SHIW), we find that individuals experiencing an earthquake are significantly more risk averse. Second-stage estimates show that risk aversion has a significant negative impact on the probability of becoming an entrepreneur. A large number of robustness checks confirm our main findings.

Massive earthquakes, risk aversion, and entrepreneurship

Maria De Paola;Vincenzo Scoppa
2021

Abstract

This paper investigates the impact of risk attitudes on the decision to become an entrepreneur. In contrast to previous research, we handle endogeneity issues relying on an instrumental variables strategy considering as a source of exogenous variation in risk aversion the early exposure to a massive earthquake. Using several waves of the Bank of Italy Survey of Household Income and Wealth (SHIW), we find that individuals experiencing an earthquake are significantly more risk averse. Second-stage estimates show that risk aversion has a significant negative impact on the probability of becoming an entrepreneur. A large number of robustness checks confirm our main findings.
Entrepreneurship, Risk attitudes, Natural disasters, Instrumental variables
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/20.500.11770/301838
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