Entrepreneurial Decisions and Liquidity Constraints

Holtz‐Eakin, Douglas; Joulfaian, David; Rosen, Harvey S.

doi:10.2307/2555834

Cited by 457 publications

(195 citation statements)

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“…Moreover, previous generations of wealthier families are more likely to be characterized by individuals who have engaged in entrepreneurial activities than the previous generations of other families; thus, because the wealth accumulated during business periods is generally not depleted immediately, these entrepreneurial families have greater resources to start or restart businesses (Quadrini, 1999). These features of the family dynamics of entrepreneurs further reinforce the intuition that the probability of becoming an entrepreneur increases if an individual has inherited wealth because initial capital is required to establish new enterprises (Holtz-Eakin et al, 1994a;1994b).…”

Section: Introductionmentioning

confidence: 79%

“…However, despite the growing list of beneficial consequences, entrepreneurial activity should not be considered an umbrella policy, mainly because entrepreneurship ing data from the 1981 and 1985 federal individual income tax returns of a group of people who received inheritances in 1982 and 1983 that includes information about the size of their inheritances, Holtz-Eakin et al (1994a) found that an inheritance of $150,000 increases the probability that an individual will continue as a sole proprietor by 1.3 percentage points and that the receipts of any surviving enterprise increase by almost 20%. Similarly, Holtz-Eakin et al (1994b) suggest that a $100,000 inheritance increases the probability of making the transition to entrepreneurship from 19.3% to 22.6%, or 3.3 percentage points. Quadrini (1999) reached similar conclusions: in wealthier families, individuals who have engaged in business activities during previous periods are more common than those who have not, and these families have greater resources to restart businesses because the wealth accumulated during the business period is generally not depleted immediately.…”

Section: Theoretical Frameworkmentioning

confidence: 97%

“…The WBGES uses new business entry density to measure entrepreneurial activity. This measure is calculated as the number of newly registered firms as a percentage of the economy's working-age population (15-64 years of age) normalized by 1,000 for the six-year period from 2004 through 2009 (Klapmight also be linked to wealth accumulation and distribution (Holtz-Eakin et al, 1994a, 1994bQuadrini, 1999;Gentry and Hubbard, 1999;Meh, 2005).…”

Section: Data Definition and Sample Selection Dependent Variablesmentioning

confidence: 99%

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High Income Inequality as a Structural Factor in Entrepreneurial Activity

Lecuna

2014

Journal of Technology Management & Innovation

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Statistical tests on a panel of data from 54 countries over the [2004][2005][2006][2007][2008][2009] period support the proposition that high income inequality and entrepreneurial activity share a positive linear relationship. In a novel approach, the dependent variable is defined from two independent and uncorrelated perspectives: (1) the World Bank Group Entrepreneurship Snapshot, which measures new business entry density based on secondary official sources; and (2) the Total Early Stage Entrepreneurial Activity of the Global Entrepreneurship Monitor project, which is a survey-based measure of formal and informal entrepreneurial participation rates. The empirical strategy is based on the logic that economies with increasing concentrations of wealth tend to encourage entrepreneurial activity because entrepreneurs accumulate more income than workers. Following the disequalizing model, once this inequality appears, it is reinforced in successive generations. The intuition behind this outcome is that a certain level of initial capital is required to establish a new enterprise, which implies that the probability of becoming an entrepreneur increases if an individual has inherited wealth.

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Section: Introductionmentioning

confidence: 79%

Section: Theoretical Frameworkmentioning

confidence: 97%

Section: Data Definition and Sample Selection Dependent Variablesmentioning

confidence: 99%

See 1 more Smart Citation

High Income Inequality as a Structural Factor in Entrepreneurial Activity

Lecuna

2014

Journal of Technology Management & Innovation

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“…Inheritance, lottery wins and other -exogenous‖ liquidity gains increase the likelihood of both becoming an entrepreneur and promoting firm growth, indicating that liquidity constraints may be important (Holtz-Eakin et al 1994a, 1994b, Blanchflower 2004. Interviews with successful entrepreneurs confirm that the overwhelming majority were initially funded by modest amounts of personal assets (Gentry and Hubbard 2004).…”

Section: Crucial Aspects Of Entrepreneurship and Taxationmentioning

confidence: 99%

“…Entrepreneurship has a distinct character marked by risk, dynamism (Schumpeter 1934), uncertainty (Knight 1921), liquidity constraints (Holtz-Eakin et al 1994a, 1994b) and the inability to separate saving from investments (Gentry and Hubbard 2004). The entrepreneur has been described as a jack-of-all-trades (Lazear 2004) who is particularly alert to change (Kirzner 1973) and distinct in his/her preferences (McClelland 1961, Brockhaus 1980.…”

Section: Crucial Aspects Of Entrepreneurship and Taxationmentioning

confidence: 99%

Entrepreneurship and the Theory of Taxation

Henrekson

Sanandaji

2009

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: A review of the literature on firm taxation reveals that the economics of entrepreneurship has not sufficiently been taken into consideration. We discuss how this affects conclusions derived from standard models of capital taxation when applied to entrepreneurial income. Some defining features of entrepreneurship important for analyzing the effects of taxation of owner-managed firms are identified. These include the lack of a well-functioning external market for entrepreneurial effort, limited access to external capital and complementarities between entrepreneurial innovation, effort and capital. Due to these constraints, the entrepreneurial project is tied to the individual owner-manager. The entrepreneur is unable to decouple saving decisions from investment decisions, and makes joint decisions on the supply of effort and capital. The return from successful entrepreneurial ventures can therefore not be readily divided into labor and capital income, in deep contrast to what is typically assumed in taxation theory. It is argued that when distinct attributes of entrepreneurship are taken into account, certain conclusions of capital taxation models may no longer hold, including the neutrality of capital taxation in owner-managed firms. Cost of capital formulas derived from the behavior of public firms could underestimate distortions when applied to the investment behavior of entrepreneurial firms. Terms of use: Documents inFor tax purposes and otherwise, it becomes useful to analyze return to entrepreneurial activity as income of a distinct factor of production. In this context, conceptual issues and the difficulties of measuring entrepreneurial income are discussed.

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Self‐Employment and Queues for Wage Work: Evidence from Chile

Contreras

Gillmore²,

Puentes

2015

J of Intl Development

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Self-employment can be considered as either the result of a self-selection process or areﬂection of rigidities and skill mismatch in the labour market or both. We estimate a doubleselection model where individuals queue for wage work instead of being self-employed in the ﬁrststage, followed by employers selecting from the queue in the second. We ﬁnd statistical supportfor the double selection model, implying that some individuals are self-employed because theycannot ﬁnd wage work, while other self-select to be self-employed. Individuals with higher educationare more often chosen as wage workers, and belonging to an ethnic group decreases the likelihood ofbeing chosen. Additionally, earnings equations suggest that high ability individuals perform better inboth the wage work and self-employment sectors

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Entrepreneurial Decisions and Liquidity Constraints

Cited by 457 publications

References 0 publications

High Income Inequality as a Structural Factor in Entrepreneurial Activity

High Income Inequality as a Structural Factor in Entrepreneurial Activity

Entrepreneurship and the Theory of Taxation

Self‐Employment and Queues for Wage Work: Evidence from Chile

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