The Right Stuff? Personality and Entrepreneurship
NBER Working Paper No. 25006
We construct a structural model of entry into self-employment to evaluate the impact of policies supporting entrepreneurship. Previous work has recognized that workers may opt for self-employment due to the non-pecuniary benefits of running a business and not necessarily because they are good at it. Other literature has examined how socio-emotional skills, such as personality traits, affect selection into self-employment. We link these two lines of inquiry. The model we estimate captures three factors that affect selection into self-employment: credit constraints, relative earnings and preferences. We incorporate personality traits by allowing them to affect sector-specific earnings as well as preferences. The estimated model reveals that the personality traits that make entrepreneurship profitable are not always the same traits driving people to open a business. This has important consequences for entrepreneurship policies. For example, subsidies for small businesses do not attract talented-but-reluctant entrepreneurs, but instead attract individuals with personality traits associated with strong preferences for running a business and low-quality business ideas.
Document Object Identifier (DOI): 10.3386/w25006
Published: Barton H. Hamilton & Nicholas W. Papageorge & Nidhi Pande, 2019. "The right stuff? Personality and entrepreneurship," Quantitative Economics, vol 10(2), pages 643-691.