Risk Attitudes and Self‐employment in China

Abstract

Using the 2006 wave of the Chinese General Social Survey, the present paper examines the effect of risk attitudes on the likelihood of entrepreneurship in China. Our results show that risk attitudes have a nonlinear effect on the likelihood of being entrepreneurs. Risk neutral people are most likely to be entrepreneurs, while both risk averse and risk seeking people prefer to work for wages. When we further divide entrepreneurs into necessity and opportunity entrepreneurs, we find only a marginal difference in risk attitudes between wage workers and necessity entrepreneurs, while less risk averse individuals tend to be opportunity entrepreneurs. Our results have important policy implications for the government's efforts to promote entrepreneurial activities. Caliendo et al., 2009; Dohmen et al., 2011). 2 To the best of our knowledge, there exist few studies (e.g. Djankov et al., 2006;Yueh, 2009;de Mel et al., 2010) regarding the impact of risk attitudes on the choice of self-employment in developing countries. One reason may be the lack of good-quality data on individual risk attitudes in developing countries. Nevertheless, risk attitudes may play a much larger role in entrepreneurship in developing countries as a result of the instability of political and economic environments and imperfect markets (de Mel et al., 2010).Although there is general agreement in the existing literature that there is a negative relationship between risk aversion and self-employment, some studies (e.g. Tucker, 1988;Parker, 2008;de Mel et al., 2010) also report no significant effect of risk attitudes on the possibility of self-employment. One explanation for the inconsistent findings is that previous studies examine different subgroups of entrepreneurs (Aguilar et al., 2013). If risk preferences are heterogeneous across subgroups, we may not be able to justify any general conclusion regarding the relationship between risk attitudes and entrepreneurship as a whole. 3 Another possibility is that the existing literature only pays attention to the linear risk attitudes effect. This practice might be problematic because personality traits including risk attitudes can have a nonlinear effect on labor market outcomes (Heckman and Kautz, 2012). 4 As the largest developing country in the world, China is an ideal case to study the

Gender gap in self‐employment: The role of risk attitudes

“…At an average probability of 10.7%, this estimate represents a 35.5% increase. This finding reinforces the conclusion that risk tolerance is a strong predictor of entrepreneurship (see Ahn, 2010;Brown et al, 2006Brown et al, , 2011Caliendo et al, 2014;Fossen, 2012;Hu, 2014;Kan and Tsai, 2006;Parker, 1997;Skriabikova et al, 2014;van Praag and Cramer, 2001). Note that the coefficient is not statistically different for men and women (see the Appendix Table A5).…”

“…Finally, Ukrainian employers also discriminate against women in recruitment and go as far as requiring information about marital status and number of children in the job application. Job announcements often specify gender, even for managerial positions (see Human Rights Watch, ), and the employers preference for hiring male employees has increased substantially over time (see Coupe and Lehmann, ). It is somewhat surprising, then, that women remain less likely than men to engage in self‐employment.…”

Risk Aversion, Entrepreneurial Attitudes, Intention and Entry Among Young People in Uganda and Germany: A Gendered Analysis

“…Moreover, an entrepreneurial attitude influences outcome expectations and consequently interest or disinterest in entrepreneurship (Baluku, 2017). This is supported by extant research linking entrepreneurial attitude to the choice of a career in entrepreneurship or self-employment (Baluku et al, 2018; Brachert et al, 2017; Douglas & Shepherd, 2002; Harris & Gibson, 2008; Hu, 2014). Attitudes not only predict intentions but also immediate and future entrepreneurial behaviours (Jones et al, 2011), including intention implementation, start-up actions as well as persistence in entrepreneurial activities.…”

Formulação e implementação, convergências e desvios: facetas da política pública do MicroEmpreendedor Individual (MEI) no plano local

“…An expressive number of countries have created programs to support entrepreneurship in their territories (Barba-Sánchez & Atienza-Sahuquillo, 2012;Ghani et al, 2014;Halabí & Lussier, 2014;Mayer-Haug et al, 2013;Obaji & Olugu, 2014;Pickernell et al, 2013;Poschke, 2013;Román et al, 2013;Slonimczyk & Gimpelson, 2015) in order to tackle informality (Castro et al, 2014;Centeno & Portes, 2006;Hu, 2014;Kus, 2014;Nguyen et al, 2014;Webb et al, 2014). Those are initiatives that, in most part, present the double target of, on one hand stimulate the development of new enterprises and, on the other, support the transition from informality to formality.…”

“…Seeking to reduce the degree of the economy`s regulation, China`s a good example for, by fighting informality and seeking to stimulate the entrepreneurship, it has reduced institutional barriers (Hu, 2014). In Turkey, within the economic deterioration years, after the oil crisis of 1974, several policies were methodically implemented in order to remove market entry barriers, make international trade feasible, make labor laws more flexible, enable the access to financing and reduce taxation.…”