[Journal:] IZA Journal of Migration [ISSN:] 2193-9039 [Volume:] 3 [Year:] 2014 [Pages:] 1-25
Do more risk loving migrants opt for self-employment? We use a novel vignette-adjusted measure of risk preferences to investigate the link between risk aversion and entrepreneurship in migrant communities. Using an original representative household survey of the migrant population in the Greater Dublin Area, we find a significant negative relationship between risk aversion and entrepreneurship. Our results show that the use of vignettes improves the significance of the results, as they simultaneously correct for differential item functioning (where respondents interpret the self-evaluation scale in different ways) between entrepreneurs and non-entrepreneurs, and correct for variation in the use of self-evaluation scales between migrants from different countries of origin. This finding may help explaining the variability in results on the correlation between risk preferences and entrepreneurship reported in previous studies.