ENTREPRENEURSHIP AND LIQUIDITY CONSTRAINTS IN DEPRIVED AREAS: EVIDENCE FROM THE SLUMS OF RIO DE JANEIRO

João Pedro Azevedo ()

Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics]

Abstract: Several economic models have described the theoretical causes and onsequences of 'credit rationing' and 'under-investment'; one string of this literature shows the long-run effects of initial wealth distribution and entrepreneurial ability on the process of occupational choice and performance, and its consequences on inequality. Surprisingly, there is very little micro-level evidence on the existence and effects of 'credit rationing' in the context of developing countries. This is the contribution of the current paper. Using a survey of 4,553 entrepreneurs in 51 slums in Rio de Janeiro, this paper uses mean and quantile regression estimates to shows the effects of the type of initial capital, credit constraints, and human capital factors on entrepreneurs' performance. The main findings of the the paper are that entrepreneurs that were able to self-finance their business start-up presented earnings 16% greater than entrepreneurs that had to borrow their initial capital. In addition, entrepreneurs that explicitly claimed to be credit constrained performed substantially worse than their observationally identical counterparts, even if they were credit worthy. Both, initial source of funding and liquidity constraint presented greater effects on the highest quantiles. In terms of human capital, the current study shows positive and statistically significant returns for both years of schooling and experience, with higher returns on the lowest quantiles, indicating the potential role of these factors on inequality reduction.

JEL-codes: J24 J44 J62 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-cfn and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.anpec.org.br/encontro2004/artigos/A04A135.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anp:en2004:135

Ordering information: This working paper can be ordered from
Secretaria da ANPEC Rua Prof Marcos Valdemar de Freitas Reis s/n Campus do Campus do Gragoatá, Bloco F Niterói, RJ 24210-201 Brazil

Access Statistics for this paper

More papers in Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics] Secretaria da ANPEC Rua Prof Marcos Valdemar de Freitas Reis s/n Campus do Campus do Gragoatá, Bloco F Niterói, RJ 24210-201 Brazil. Contact information at EDIRC.
Bibliographic data for series maintained by Rodrigo Zadra Armond ().