Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185498
Authors: 
Dell'Era, Michele
Opromolla, Luca David
Santos-Pinto, Luís
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7300
Abstract: 
This paper studies the impact of optimism on occupational choice using a general equilibrium framework. The model shows that optimism has four main qualitative effects: it leads to a misallocation of talent, drives up input prices, raises the number of entrepreneurs, and makes entrepreneurs worse off. We calibrate the model to match U.S. manufacturing data. This allows us to make quantitative predictions regarding the impact of optimism on occupational choice, input prices, the returns to entrepreneurship, and output. The calibration shows that optimism can explain the empirical puzzle of the low mean returns to entrepreneurship compared to average wages.
Subjects: 
general equilibrium
entrepreneurship
optimism
JEL: 
D50
H21
J24
L26
Document Type: 
Working Paper

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