Liquidity Constraints, Household Wealth, and Entrepreneurship
Erik Hurst () and
Annamaria Lusardi ()
Journal of Political Economy, 2004, vol. 112, issue 2, 319-347
The propensity to become a business owner is a nonlinear function of wealth. The relationship between wealth and entry into entrepreneurship is essentially flat over the majority of the wealth distribution. It is only at the top of the wealth distributionafter the ninety-fifth percentilethat a positive relationship can be found. Segmenting businesses into industries with high and lowstarting capital requirements, we find no evidence that wealth matters more for businesses requiring higher initial capital. When using inheritances as an instrument for wealth, we find that both past and future inheritances predict current business entry, showing that inheritances capture more than simply liquidity. We further exploit the regional variation in house prices and find that households that lived in regions in which housing prices appreciated strongly were no more likely to start a business than households in other regions.
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (360) Track citations by RSS feed
Downloads: (external link)
http://dx.doi.org/10.1086/381478 main text (application/pdf)
Access to the online full text or PDF requires a subscription.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:112:y:2004:i:2:p:319-347
Access Statistics for this article
More articles in Journal of Political Economy from University of Chicago Press
Series data maintained by Journals Division ().