Liquidity, Risk, and Occupational Choices

Milo Bianchi and Matteo Bobba

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Abstract: We explore which financial constraints matter the most in the choice of becoming an entrepreneur. We consider a randomly assigned welfare program in rural Mexico and show that cash transfers signi cantly increase entry into entrepreneurship. We then exploit the cross-household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received. Guided by a simple occupational choice model, we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints.

Keywords: entrepreneurship; liquidity; insurance; Financial constraints (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-01629743v1
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Citations: View citations in EconPapers (35)

Published in Review of Economic Studies, 2013, 80 (2), pp.491-511. ⟨10.1093/restud/rds031⟩

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Related works:
Journal Article: Liquidity, Risk, and Occupational Choices (2013)
Working Paper: Liquidity, risk and occupational choices (2010)
Working Paper: Liquidity, risk and occupational choices (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01629743

DOI: 10.1093/restud/rds031

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