Risk preferences and decision to be an employer. Evidence from transition economies

by Dilnovoz Abdurazzakova


Abstract

We investigate impact of individual risk preferences on decision to be an employer using unique cross country data. We specifically use Life in Transition Survey wave 3 administered by the World Bank and European Bank for Reconstruction and Development in 2016  among the sample of 32000 individuals across 34 countries. The sample is representative of a transition region with over a half billion population. We find that the most risk loving individuals are the most likely to become employers. Interestingly we find that individuals with the second highest risk preference are likely to choose to be a self-employed informally. The most risk averse people select to be wage employees. Our findings are robust for alternative country level controls. Our findings explain low levels of job creation in the transition region and provide an alternative evidence to improve business environment.