Risk aversion, downside risk aversion, and the transition to entrepreneurship
Date
2020
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Article
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Abstract
In this paper, we discuss the transition from secure employment to risky selfemployment (entrepreneurship) caused by a small increase in wealth. Building on
the apportioning risk literature, we prove that the transition from secure employment to risky entrepreneurship is based on a measure of the difference between the
strength of downside risk aversion and the strength of risk aversion. This result
highlights the idea that using the behavioral approach of risky lotteries to study
entrepreneurship can produce different results from the traditional economic theory
of entrepreneurship, which can have policy implications that must be considered
with caution.
Description
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Citation
Theory and Decision, 2021, vol.91:123–133
Keywords
Apportioning risk, Entrepreneurship, Downside risk aversion