The effects of experience on entrepreneurial optimism and uncertainty

S Fraser*, FJ Greene

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This paper develops an occupational choice model in which entrepreneurs, who are initially uncertain about their true talent, learn from experience. As a consequence, both optimistic bias in talent beliefs and uncertainty diminish with experience. The model gives rise naturally to a heteroscedastic probit estimator of occupational choices, in contrast to the commonly used homoscedastic estimator. The model is applied to British data on self-employment and optimism for the period 1984-99. The empirical analysis supports the main propositions of the model: principally, entrepreneurs are found to be more optimistic than employees, and both optimism and uncertainty diminish with experience.

Original languageEnglish
Pages (from-to)169-192
Number of pages24
Issue number290
Publication statusPublished - 28 Feb 2006

Keywords / Materials (for Non-textual outputs)

  • Self-employment
  • risk aversion
  • model
  • equilibrium
  • selection
  • dynamics
  • industry
  • demand
  • choice
  • income


Dive into the research topics of 'The effects of experience on entrepreneurial optimism and uncertainty'. Together they form a unique fingerprint.

Cite this