Personality traits, subjective learning, and entrepreneurial decision making

We present a dynamic occupational choice model with a learning algorithm simultaneously capable to explain entrepreneurial entry, exit, and survival. According to our model, those individuals decide to become entrepreneurs who expect their productivity to be highest when managed by themselves. As we further assume that individuals have incomplete information about their own non-cognitive skills, which are relevant for entrepreneurial processes, entrepreneurial entry in our model is driven by overconfidence in the own skills---in line with earlier empirical findings. After entry, entrepreneurs receive noisy feedback from the market. Depending on a set of traits different from those driving the entry process into the market, entrepreneurs decide to either stay or leave the market. Our learning-based model generates survival rates decreasing at decreasing rates and captures findings on the earnings puzzle according to which median entrepreneurs do not earn more than median wage workers

Career choice under uncertainty

Contemporary theoretical literature on occupational choice consists mostly of models that treat choice outcomes as either deterministic or risky. This paper proposes taking a slightly more realistic perspective by constructing a general occupational choice model on the basis of the assumption that outcomes are partially uncertain such that some reward distributions are unknown. The change in perspective yields some major advantages: Learning and career trajectories, which in general cannot be generated by models with deterministic or risky rewards, become a natural feature of the dynamic solution of sequential occupational choice problems. Furthermore, earnings-puzzle-like observations can be explained by sufficiently high uncertainty aversion, as uncertainty aversion has a significant impact on learning. In addition, central model predictions are consistent with data on relative choice frequencies and enterprise death rates

Direct and Indirect Crisis Effects on International Trade or: Is There a Chance to Employ an Income Stimulus to Stimulate Exports?

While research concerning the fundamental connection between financial crises and international trade, at first appearance, provides conclusive results, it displays two specific methodological biases by ignoring income effects: first, crisis influence is underestimated; second, crisis dynamics do not take account of income dynamics, thereby giving the analysis a touch of avoidable incompleteness. This paper offers a solution to both problems without leaving the standard framework of the gravity model of trade. The solution is brought by a basic crisis adjustment technique of income. As an empirical test, the developed approach is employed to estimate the crisis response of German trade during the recent global crisis. Results correspond to consequences deducted from an elementary impact model for a quasi-non-crisis country: exports are mainly affected by non-income effects and foreign income effects; imports are influenced by domestic income and global non-income effects, and reveal expected dynamics. The outcome has two implications of interest for policy decisions: (i) stimulus spillovers can come back, and (ii) the indirect effect sensitivity of imports delivers a strong case for an international coordination of fiscal measures

Direct and Indirect Crisis Effects on International Trade or: Is There a Chance to Employ an Income Stimulus to Stimulate Exports?

While research concerning the fundamental connection between financial crises and international trade, at first appearance, provides conclusive results, it displays two specific methodological biases by ignoring income effects: first, crisis influence is underestimated; second, crisis dynamics do not take account of income dynamics, thereby giving the analysis a touch of avoidable incompleteness. This paper offers a solution to both problems without leaving the standard framework of the gravity model of trade. The solution is brought by a basic crisis adjustment technique of income. As an empirical test, the developed approach is employed to estimate the crisis response of German trade during the recent global crisis. Results correspond to consequences deducted from an elementary impact model for a quasi-non-crisis country: exports are mainly affected by non-income effects and foreign income effects; imports are influenced by domestic income and global non-income effects, and reveal expected dynamics. The outcome has two implications of interest for policy decisions: (i) stimulus spillovers can come back, and (ii) the indirect effect sensitivity of imports delivers a strong case for an international coordination of fiscal measures.gravity model of trade; German trade; crisis impact; income effects; stimulus effects

Direct and Indirect Crisis Effects on International Trade or: Is There a Chance to Employ an Income Stimulus to Stimulate Exports?

While research concerning the fundamental connection between financial crises and international trade, at first appearance, provides conclusive results, it displays two specific methodological biases by ignoring income effects: first, crisis influence is underestimated; second, crisis dynamics do not take account of income dynamics, thereby giving the analysis a touch of avoidable incompleteness. This paper offers a solution to both problems without leaving the standard framework of the gravity model of trade. The solution is brought by a basic crisis adjustment technique of income. As an empirical test, the developed approach is employed to estimate the crisis response of German trade during the recent global crisis. Results correspond to consequences deducted from an elementary impact model for a quasi-non-crisis country: exports are mainly affected by non-income effects and foreign income effects; imports are influenced by domestic income and global non-income effects, and reveal expected dynamics. The outcome has two implications of interest for policy decisions: (i) stimulus spillovers can come back, and (ii) the indirect effect sensitivity of imports delivers a strong case for an international coordination of fiscal measures

Business cycles and start-ups across industries: An empirical analysis for Germany

We analyze whether start-up rates in different industries systematically change with business cycle variables. We mostly find correlations that are consistent with coun- ter-cyclical influences of the business cycle on entries in both innovative and non-in- novative industries. Entries into the large-scale industries, including the innovative part of the manufacturing sector, are more strongly influenced by changes in the cy- clical component of unemployment, while entries into small-scale industries, like the knowledge intensive services, are merely influenced by changes in the cyclical com- ponent of GDP. Business formation may therefore have a stabilizing effect on the economy

Business cycles and start-ups across industries: An empirical analysis of German regions

We analyze whether start-up rates in different industries systematically change with business cycle variables. Using a unique data set at the industry level, we mostly find correlations that are consistent with counter-cyclical influences of the business cycle on entries in both innovative and non-innovative industries. Entries into the largescale industries, including the innovative part of manufacturing, are only influenced by changes in the cyclical component of unemployment, while entries into small-scale industries, like knowledge intensive services, are mostly influenced by changes in the cyclical component of GDP. Thus, our analysis suggests that favorable conditions in terms of high GDP might not be germane for start-ups. Given that both innovative and non-innovative businesses react counter-cyclically in 'regular' recessions, business formation may have a stabilizing effect on the economy

Business Cycles and Start-ups across Industries: An Empirical Analysis of German Regions

We analyze whether start-up rates in different industries systematically change with business cycle variables. Using a unique data set at the industry level, we mostly find correlations that are consistent with counter-cyclical influences of the business cycle on entries in both innovative and non-innovative industries. Entries into the large-scale industries, including the innovative part of manufacturing, are only influenced by changes in the cyclical component of unemployment, while entries into small-scale industries, like knowledge intensive services, are mostly influenced by changes in the cyclical component of GDP. Thus, our analysis suggests that favorable conditions in terms of high GDP might not be germane for start-ups. Given that both innovative and non-innovative businesses react counter-cyclically in 'regular' recessions, business formation may have a stabilizing effect on the economy

Business cycles and start-ups across industries: An empirical analysis of German regions

We analyze whether start-up rates in different industries systematically change with business cycle variables. Using a unique data set at the industry level, we mostly find correlations that are consistent with counter-cyclical influences of the business cycle on entries in both innovative and non-innovative industries. Entries into the large-scale industries, including the innovative part of manufacturing, are only influenced by changes in the cyclical component of unemployment, while entries into small-scale industries, like knowledge intensive services, are mostly influenced by changes in the cyclical component of GDP. Thus, our analysis suggests that favorable conditions in terms of high GDP might not be germane for start-ups. Given that both innovative and non-innovative businesses react counter-cyclically in 'regular' recessions, business formation may have a stabilizing effect on the economy

Prediction based on entrepreneurship-prone personality profiles: sometimes worse than the toss of a coin

The human personality predicts a wide range of activities and occupational choices - from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust