Risk Attitude and Self-Employment

The choice of entrepreneurial activity and self-employment is associated with higher level of risk and requires a degree of love for it. The literature on risk preferences and entrepreneurship is extensive, but there is a limited amount of empirical research are on the crossroads of these topics. The papers focused on the Russian labor market taking into account not only the number of entrepreneurs, but also their quality and motivation of their choose, do not exist. Based on the data of the RLMS of the Higher School of Economics for 2016-2018, I build multinomial logit models for choosing entrepreneurial activity and analyze the effect of risk preferences on this choice. The main conclusion of the work is that risk preferences are positively and not linearly correlated with the choice of entrepreneurial activity. The robustness of this result was tested by using different samples and different definitions of risk attitude and entrepreneurship. The conclusion is stable only for groups of voluntary entrepreneurs, however for involuntary ones the decision to be an entrepreneur does not correlate significantly with subjective attitude towards risk. Profiles of probability of entrepreneurship are more stable and ascending for men, but not for women, but this may be due to limited amount of observations of both groups.