Entrepreneurship and Liquidity Constraints: Evidence from Sweden

Jenny Nykvist ()
Additional contact information
Jenny Nykvist: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

No 2005:21, Working Paper Series from Uppsala University, Department of Economics

Abstract: Do potential entrepreneurs face liquidity constraints? Or to put it differently, does a person have to be wealthy to start a new business? This question has been discussed in a large literature that has documented a positive relationship between initial wealth and entrepreneurship. However, in a recent paper Hurst and Lusardi (2004) use higher order of polynomials in wealth and find that there is no relationship between household initial wealth and the probability of starting an own business throughout most of the wealth distribution in the United States. In this paper we examine this relationship using similar methods on Swedish data. The data set used is LINDA, a register-based longitudinal data set for Sweden. The relationship is estimated using probit models with different specifications of wealth. However, the result that wealth is not important for new entrepreneurs cannot be replicated. Instead, the main finding of the paper is that the relationship between wealth and transition into entrepreneurship is positive but diminishing for the major part of the wealth distribution. Moreover, the relationship between wealth and entrepreneurship gets stronger as the models get less restricted with respect to wealth. Our result leads us to the conclusion that liquidity constraints do play a significant role when determining transition into entrepreneurship in Sweden.

Keywords: Liquidity constraints; wealth; entrepreneurship; starting capital; business ownership (search for similar items in EconPapers)
JEL-codes: D31 J23 J24 M13 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-09-10
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eec, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://uu.diva-portal.org/smash/get/diva2:107266/FULLTEXT01.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:hhs:uunewp:2005_021

Access Statistics for this paper

More papers in Working Paper Series from Uppsala University, Department of Economics Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Ulrika Öjdeby ().