Tuesday, 22 February 2022 13:15

Economic Shocks Affect the Willingness

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I investigate whether differences in macroeconomic experiences during formative years of individuals affect their entrepreneurial behavior throughout their careers. I find that living in an area with high unemployment during an individual’s formative years decreases the propensity of an individual to start a business throughout their entire career history. I distinguish between two types of businesses: incorporated) and unincorporated. Using panel data, I find that those individuals who reside in a region that experience a larger shock to unemployment during their formative years significantly decrease the propensity to start an incorporated enterprise throughout their entire career. Consistent with the prior literature, I find that experiencing a macroeconomic shock during adolescence also significantly increases the risk-aversion of an individual. However, the observed decrease in entrepreneurial proclivity of young adults who experienced an economic shock during adolescence is not fully explained by increased risk-aversion.

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