An Estimated Model of Entrepreneurial Choice under Liquidity Constraints
David Evans () and
Boyan Jovanovic ()
Journal of Political Economy, 1989, vol. 97, issue 4, 808-27
Is the capitalist function distinct from the entrepreneurial function in modern economies? Or does a person have to be wealthy before he or she can start a business? Frank H. Knight and Joseph A. Schumpeter held different views on the answer to this question. The authors' empirical findings side with Knight: liquidity constraints bind, and a would-be entrepreneur must bear most of the risk inherent in his venture. The reasoning is roughly this: the data show that wealthier people are more inclined to become entrepreneurs. In principle, this could be so because the wealthy tend to make better entrepreneurs, but the data reject this explanation. Instead, the data point to liquidity constraints: capital is essential for starting a business, and liquidity constraints tend to exclude those with insufficient funds at their disposal. Copyright 1989 by University of Chicago Press.
References: Add references at CitEc
Citations: View citations in EconPapers (1219) Track citations by RSS feed
Downloads: (external link)
http://dx.doi.org/10.1086/261629 full text (application/pdf)
Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JPE for details.
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:97:y:1989:i:4:p:808-27
Access Statistics for this article
More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().