nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒06‒24
three papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey By Marco Caliendo; Frank M. Fossen; Alexander S. Kritikos
  2. Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany By Frank M. Fossen; Viktor Steiner
  3. Institutions, Networks and Entrepreneurship Development in Russia: An Exploration By Ruta Aidis; Saul Estrin

  1. By: Marco Caliendo (DIW Berlin, IAB Nuremberg and IZA Bonn); Frank M. Fossen (DIW Berlin); Alexander S. Kritikos (European University Viadrina, Frankfurt (Oder), GfA and IAB Nuremberg)
    Abstract: The influence of risk aversion on the decision to become self-employed is a much discussed topic in the entrepreneurial literature. Conventional wisdom asserts that the role model of an entrepreneur requires to make risky decisions in uncertain environments and hence that more risk-averse individuals are less likely to become an entrepreneur. Empirical tests of this assumption are scarce however, mainly because reliable measures for risk-aversion are not available. We base our analysis on the most recent waves of the German Socio-Economic Panel (SOEP) which allow us to use experimentally-validated measures of risk attitudes. Most importantly and in contrast to previous research, we are able to examine whether the decision of starting a business is influenced by objectively measurable risk attitudes at the time when this decision is made. Our results show that in general individuals with lower risk aversion are more likely to become self-employed. Sensitivity analysis reveals, however, that this is true only for people coming out of regular employment, whereas for individuals coming out of unemployment or inactivity risk attitudes do not seem to play a role in the decision process.
    Keywords: risk attitudes, entrepreneurship, self-employment
    JEL: D81 J23 M13
    Date: 2006–06
  2. By: Frank M. Fossen (DIW Berlin); Viktor Steiner (Free University of Berlin, DIW Berlin and IZA Bonn)
    Abstract: Entrepreneurial activity is often regarded as an engine for economic growth and job creation. Through tax policy, governments possess a potential lever to influence the decisions of economic agents to start and close small businesses. In Germany, the top marginal income tax rates were reduced exclusively for entrepreneurs in 1994 and 1999/2000. These tax reforms provided two naturally defined control groups that enable us to exploit the legislation changes as "natural experiments". First, the tax rate reductions did not apply to freelance professionals (Freiberufler), and second, entrepreneurs with earnings below a certain threshold were not affected. Using data from two different sources, the SOEP and the Mikrozensus (LFS), we analyse the effect of the tax cuts on transitions into and out of selfemployment and on the rate of self-employment. We apply a "difference-in-difference-indifference" estimation technique within a discrete time hazard rate model. The results indicate that the decrease in tax rates did not have a significant effect on the self-employment decision.
    Keywords: taxation, entrepreneurship, natural experiment, difference-in-difference-indifference estimation
    JEL: H24 H25 J23
    Date: 2006–06
  3. By: Ruta Aidis (SSEES, University College London and FEE, University of Amsterdam); Saul Estrin (London Business School and IZA Bonn)
    Abstract: In this paper we explore the ways in which institutions and networks influence entrepreneurial development in Russia. By utilizing new Global Entrepreneurship Monitor (GEM) data collected in 2001, we investigate the effects of the weak institutional environment in Russia in terms of three dimensions: on the rate of productive entrepreneurial activity measured in terms of start-ups and existing business owners; on the characteristics of business owners; and on business financing. In addition, the analysis explores the effectiveness of Russia’s informal networks for circumventing the weak institutional environment for business development. Our results indicate that Russia’s business owners share many of the same characteristics as business owners in advanced western countries, though education is not associated with entrepreneurial activity. However, the main differences are in the sources of financing and the fact that relatively few individuals engage in productive entrepreneurial activity. Our results support the notion of the limited effectiveness of Russia’s networks for supporting entrepreneurial activity in its weak institutional environment.
    Keywords: entrepreneurship, institutions, networks, Russia
    JEL: J23 M13
    Date: 2006–06

This nep-ent issue is ©2006 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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