Entry into Self-employment and Individuals’ Risk-taking Propensities
Small Business Economics,
Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.
How Forecast Accuracy Depends on Conditioning Assumptions
IWH Discussion Papers,
This paper examines the extent to which errors in economic forecasts are driven by initial assumptions that prove to be incorrect ex post. Therefore, we construct a new data set comprising an unbalanced panel of annual forecasts from different institutions forecasting German GDP and the underlying assumptions. We explicitly control for different forecast horizons to proxy the information available at the release date. Over 75% of squared errors of the GDP forecast comove with the squared errors in their underlying assumptions. The root mean squared forecast error for GDP in our regression sample of 1.52% could be reduced to 1.13% by setting all assumption errors to zero. This implies that the accuracy of the assumptions is of great importance and that forecasters should reveal the framework of their assumptions in order to obtain useful policy recommendations based on economic forecasts.
IWH hosts award-winning US economist The renowned Max Planck-Humboldt Research Award 2019 goes to Ufuk Akcigit,...
Study programme The course programme is a structured curriculum that provides...
Joint Economic Forecast
Joint Economic Forecast The joint economic forecast is an instrument for evaluating...
Labour Market Power and the Distorting Effects of International Trade
IWH Discussion Papers,
This article examines how trade shocks shape labour market imperfections that create market power in labour markets and prevent an efficient allocation of labour. I develop a framework for measuring such labour market distortions in monetary terms and document large degrees of those distortions in Germany’s manufacturing sector. Import competition can only exert labour market disciplining effects when firms rather than workers have labour market power. Otherwise, export demand and import competition shocks tend to fortify existing distortions by amplifying labour market power structures. This diminishes the gains from trade compared to a model with perfectly competitive labour markets.
PhD Student (Doctoral Researcher, 50%) (f/m/x) [2019-06]
Vacancy PhD Student (Doctoral Researcher, 50%) (f/m/x) ...
East Germany Rearguard Only investments in education will lead to a further catch-up ...
Info Graphs Sometimes pictures say more than a thousand words. Therefore, we selected...