Search Results
Author: Francis, Johanna Leigh
Resulting in 1 citation.
| 1. |
Francis, Johanna Leigh |
|
Saving, Investment, and the Entrepreneurship Decisions of the Wealthy Ph.D. Dissertation, The Johns Hopkins University, 2007. DAI-A 67/11, May 2007 Cohort(s): NLSY79 Publisher: ProQuest Dissertations & Theses (PQDT) Keyword(s): Financial Investments; Heterogeneity; Life Cycle Research; Occupational Choice; Savings; Wealth Permission to reprint the abstract has not been received from the publisher. In this dissertation, I focus on understanding the saving behavior of the wealthy in a life cycle context that includes income and preference heterogeneity, uncertainty about future earnings and occupational choice. The second chapter of my dissertation considers a model of saving behavior in which individuals enjoy being rich, not only because of the future spending that wealth permits, but also because they assign an intrinsic value to the ownership of wealth. This choice of utility function, often called 'capitalist spirit preferences', as articulated by Max Weber (1905), permits heterogeneity in preferences: the very wealthy gain utility directly from wealth, while the rest of the population cares only about consumption, allocating saving for retirement and precautionary reasons. Using this utility function, I construct and simulate a precautionary savings model and calibrate it to the U.S. economy. The simulation results suggest that the model is able to explain the observed right skewness of the U.S. wealth distribution fairly well. Moreover, this form of preferences generates increasing risk tolerance with increasing wealth. This last result is consistent with the empirical observation that the portfolios of the wealthy tend to include a higher proportion of risky assets. Although the model I developed in the second chapter provides a good fit to the wealth distribution, it was not able to replicate the vast wealth held in the top 5 percentiles of the distribution. Thus, in the third chapter of my dissertation I generalize the income possibilities to include returns on entrepreneurial ventures. I construct and simulate a model where individuals choose between wage work and entrepreneurship. In combination with capitalist spirit preferences the possibility of high returns on entrepreneurial ventures allows the model to generate all of the skewness of the wealth distribution. The final chapter of this dissertation focuses on the relationship between wealth accumulation and the decision to become an entrepreneur. Empirical studies find a positive relationship between being male, white, older, married, having more assets, and self-employment (see Dunn and Holtz-Eaken 2000). Yet, most theoretical research focuses on the importance of unobservable factors such as risk aversion, entrepreneurial ability and the desire to be one's own boss (see Evans and Jovanovic 1989). Not surprisingly, there exists little empirical evidence on how important these characteristics are in the decision to become an entrepreneur, in particular, whether they play major or minor roles relative to assets and wage opportunities. Further, there is no consensus on whether aspiring entrepreneurs are liquidity constrained (Gentry and Hubbard 2000; Hurst and Lusardi 2003). Using a panel of data from the 1979 National Longitudinal Survey of Youth, I show that not only are liquidity constraints unlikely to be the major factor in the decision to become an entrepreneur, the characteristics pointed to in the theoretical literature are far more important for this decision. |
|
|
Bibliography Citation
Francis, Johanna Leigh. Saving, Investment, and the Entrepreneurship Decisions of the Wealthy. Ph.D. Dissertation, The Johns Hopkins University, 2007. DAI-A 67/11, May 2007. |