Liberalizing Home-Based Business

Sumit Agarwal (), Tien Foo Sing, Changcheng Song () and Jian Zhang ()
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Sumit Agarwal: Department of Finance, National University of Singapore, Singapore 119245
Changcheng Song: Department of Finance, Singapore Management University, Singapore 188065
Jian Zhang: Faculty of Business and Economics, The University of Hong Kong, Hong Kong

Management Science, 2024, vol. 70, issue 12, 8301-8321

Abstract: Working at home benefits entrepreneurs by lowering fixed costs and allowing them to engage in joint market and household production. We evaluate a large-scale reform in Singapore, the Home Office Scheme, that allowed business creation at one’s residential property and study whether home-based entrepreneurship spurs entrepreneurial activities. The difference-in-differences estimate shows that the reform led to a significantly higher level of business creation and the firms newly created in response to the reform had a higher survival rate. The effect is more pronounced for low-income female individuals and industries with high start-up capital, implying that financial constraints and nonpecuniary benefits likely drive the effect. The reform also encourages entrepreneurs to become serial entrepreneurs, and they open a larger business with a similar survival rate for their second firm. Overall, our findings suggest that the program effectively attracted more entry into self-employment without significantly lowering the average quality of the pool.

Keywords: entrepreneurship; home-based business; experimentation (search for similar items in EconPapers)
Date: 2024
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