Heterogeneous Risk Preferences, Entrepreneurship, and Wealth
- Author(s)
- Monika Merz, Brigitte Hochmuth, Fabian Prettenthaler
- Abstract
This paper studies how individual risk attitudes shape occupational choice and wealth
accumulation. Using self-reported individual risk preferences from the German Socioeconomic Panel (GSOEP), we estimate that an increase in risk tolerance raises the probability of a worker transitioning to self-employment. We also develop a life-cycle model of occupational choice with Epstein-Zin preferences and heterogeneous risk attitudes to study how risk aversion interacts with entrepreneurial ability and wealth in determining entry into self-employment and its aggregate implications. Counterfactual simulations show that increasing business risk reduces entry but
improves selection by entrepreneurial skills. In contrast, Germany’s “1-Euro GmbH” reform of 2008 weakened the role of risk tolerance for entry and increased participation by more risk-averse individuals.- Organisation(s)
- Department of Economics
- Pages
- 1-48
- Publication date
- 05-2025
- Austrian Fields of Science 2012
- 502018 Macroeconomics, 502001 Labour market policy
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/d063761a-8d34-4e3c-a764-da1a80884d9e