Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany

Dorothea Schaefer (), Oleksandr Talavera () and Charlie Weir
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Dorothea Schaefer: DIW Berlin
Charlie Weir: Aberdeen Business School
Authors registered in the RePEc Author Service: Dorothea Schäfer

No 9, University of East Anglia Applied and Financial Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.

Abstract: We investigate the link between the propensity to become an entrepreneur and exogenous release from financial constraints in Germany. This is defined in terms of the movement from employment to self-employment on receipt of a financial windfall. A theoretical framework developing Evans and Jovanovic (1989) is set up and tested with panel data from German households. The results show that financial constraints do exist given that individuals are more likely to start a personal business after receiving a windfall gain. The value of windfall gains has a significant but non linear effect on the decision to become self employed. The data reveal that differences in ability and income affect the change in employment status. We also report that there is no evidence that becoming self employed involves the anticipation of windfall gains.

Keywords: Entrepreneurship; windfall gains; financial constraints (search for similar items in EconPapers)
JEL-codes: G20 M13 (search for similar items in EconPapers)
Date: 2010-05-03
New Economics Papers: this item is included in nep-ent
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Entrepreneurship, windfall gains and financial constraints: Evidence from Germany (2011)
Working Paper: Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany (2010)
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