Self-employment and risk aversion - Evidence from psychological test data

Jesper Ekelund, Edvard Johansson, Marjo-Riitta Järvelin, Dirk Lichtermann

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Abstract

This paper investigates the effect of risk aversion on an individual's probability of being self-employed by using psychometric data from a large, population-based cohort of Finns born in 1966. We found that our measure of risk aversion, a facet of a basic temperament dimension, harm avoidance, has a significant negative effect on self-employment status. Since this measure is directly derived from a highly valid biosocial theory of normal personality variation (Arch. Gen. Psychiatry 44 (1987) 573) whose scalable dimensions manifest well before adulthood and remain stabile over lifetime, we argue that risk aversion is a psychological factor causative of the choice to become self-employed.
Original languageEnglish
Peer-reviewed scientific journalLabour economics
Volume12
Issue number5
Pages (from-to)649-659
Number of pages11
ISSN0927-5371
DOIs
Publication statusPublished - 10.2005
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • Self-employment
  • Risk aversion
  • Psychological test data

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    Ekelund, J., Johansson, E., Järvelin, M-R., & Lichtermann, D. (2005). Self-employment and risk aversion - Evidence from psychological test data. Labour economics, 12(5), 649-659. https://doi.org/10.1016/j.labeco.2004.02.009