Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174008 
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers No. 11098
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
The formation of expectations is a fundamental part of the process when people decide about engaging in an entrepreneurial venture. We evaluate the accuracy of newly self-employed people's predictions of their overall future wellbeing. Based on individual panel data for Germany, we find that they are overly optimistic when we compare their predicted life satisfaction with their actual life satisfaction five years later on. This overoptimism also holds for those entrepreneurs who successfully remain in business for at least five years. A possible reason might be that they underestimate the heavy workload reflected in higher working hours than desired and the drop in leisure satisfaction.
Subjects: 
adaptation
overoptimism
life satisfaction
projection bias
wellbeing
self-employed
JEL: 
D83
D91
J20
I31
Document Type: 
Working Paper

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