Funding Self-Employment: The Role of Consumer Credit

Abstract

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. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. This paper investigates whether self-employed households use consumer loans -in particular instalment loans and overdrafts -to finance business activities. Controlling for financial and non-financial household variables we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analyzing the correlation between consumer loan take-ups and consumption of selfemployed in comparison to employee households, we find first evidence that overdrafts are used by self-employed to finance their business as well. This indicates that intermingling constitutes a financing strategy when regular business loans might not be accessible.JEL Classification: G32, D12, D14

Do entrepreneurs really earn less?

“…The evidence suggests that in this country the distribution of entrepreneurial earnings has a higher standard deviation than the wage distribution due to higher incomes in upper percentiles (Merz, 2006). Kneiding and Kritikos (2013) based on data from the German 'Survey of Income and Consumption' as well as Martin (2013) based on data of the German Socio-economic panel (GSOEP), both show that mean and median earnings of self-employed are higher than those of paid employees and the latter research further reveals that a switch from paid employment to self-employment is sometimes associated with an increase in earnings.…”

Demand Side Analysis of Microlending Markets in Germany

“…Second, banks might also be willing to offer business loans below €25,000, or, third, business loans are replaced by consumer loans (for first evidence on the latter suggestion, cf. Kneiding and Kritikos, 2007). However, the above mentioned data give no information on these sources.…”