Heterogeneous Risk Preferences, Entrepreneurship, and Wealth Inequality
General Information
Funding agency: OeNB Anniversary Fund (project number 18885)
Grant size: 163.000 €
Project duration: 10/2023-6/2026
Project team: Monika Merz (lead), Brigitte Hochmuth, Fabian Prettenthaler
Abstract
We study the role of heterogeneous risk preferences as determinants of entrepreneurial decisions and their implications for wealth inequality. We ask how individuals’ risk attitude affects their choice of becoming a risk-bearing entrepreneur as opposed to a wage worker with a stable income, and how this affects wealth accumulation via savings or investment decisions.
We combine survey evidence on subjective risk attitudes with individual responses to hypothetical lottery questions and infer individual measures of risk aversion. Empirically, we investigate the importance of risk attitudes for individuals to transition to self-employment. We use these insights in a quantitative life-cycle model with occupational choice and heterogeneous risk preferences to conduct policy experiments. We analyze how progressive income taxes, and a reform in Germany aimed at facilitating the foundation of start-ups shape macroeconomic aggregates and the wealth distribution.
Presentations
April 2024, Fabian Prettenthaler, Vienna PhD Workshop, CEU University, Vienna
May 2024, Fabian Prettenthaler, T2M, University of Amsterdam
May 2024, Fabian Prettenthaler, QED Jamboree, University of Amsterdam
August 2024, Fabian Prettenthaler, 39th Annual Conference, European Economic Association, Rotterdam
September 2024, Fabian Prettenthaler, Annual Conference, NOeG, Vienna
October 2024, Fabian Prettenthaler, Vienna Macro Café, IHS, Vienna
December 2024, Fabian Prettenthaler, 3rd CEPR Paris Symposium (scheduled)