Evidence from a Nationally Representative Survey
This project revisits the relation between risk tolerance and business creation. While it is widely accepted that attitudes toward risk influence occupational choices, the argument that individuals who choose entrepreneurship over employment exhibit high risk tolerance remains a topic of considerable debate. Previous research has faced the empirical challenge of systematically measuring risk preferences over time among a pool of potential entrepreneurs. Our methodological approach leverages data from a longitudinal survey, representative of the Mexican population, that captures a broad range of socioeconomic and demographic aspects at the individual, household, and community levels. In this face-to-face survey, respondents elicit attitudes toward risk when choosing gambles with varying payoffs.
For identification of the studied effect, we exploit variation in exposure to these phenomena across Mexico. Recent studies consistently document fluctuations in risk preferences following natural disasters. Preliminary findings indicate that individuals displaying low risk aversion are significantly more likely to establish new businesses. Additionally, the size of the venture, proxy by number of non-family employees, increases with the risk tolerance of the entrepreneur.