Liquidity Constraints, Household Wealth, and Entrepreneurship

Hurst, Erik; Lusardi, Annamaria

doi:10.1086/381478

“…See Evans and Leighton (1989), Holtz-Eakin, Joulfaian and Rosen (1994) and Taylor (2001). Hurst and Lusardi (2004) show that the relationship between household wealth and the propensity to start a business is highly non-linear: using American income data they show that a positive relation can be found only for households in the top 5% of the wealth distribution. An interesting extension of the literature can be found in Burke, FitzRoy and Nolan (2000) which uses a new model and a large single cohort British data set to provide estimates of both the self-employment decision as well as income and job creation.…”

Section: Insights From the Literaturementioning

confidence: 99%

Determinants of entrepreneurial engagement levels in Europe and the US

Grilo¹,

Thurik²

2008

Industrial and Corporate Change

View full text Add to dashboard Cite

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: In this paper the process of the entrepreneurial decision is decomposed in seven engagement levels ranging from "never thought about starting a business" to "gave up", "thinking about it", "taking steps for starting up", "having a young business", "having an older business" and "no longer being an entrepreneur". By using a multinomial logit model we allow the effect of covariates to differ across the various entrepreneurial engagement levels. Data from two Entrepreneurship Flash Eurobarometer surveys (2002 and2003) containing over 20,000 observations of the 15 old EU member states, Norway, Iceland, Liechtenstein and the US are used. Other than demographic variables, the set of explanatory variables used includes the perception by respondents of administrative complexities, of availability of financial support and of risk tolerance, the respondents' preference for self-employment and country specific effects. Among our results we find that the perception of lack of financial support has no discriminative effect across the various levels of entrepreneurial engagement while perception of administrative complexities plays a negative role only for high levels of engagement. Terms of use: Documents in

show abstract

“…Among the personal characteristics of the founder, family background is also singled out as a key factor by econometric estimates which explain new firm formation as an act of self-employment (see Evans and Leighton, 1989;De Wit and Van Winden, 1989;Blanchflower and Oswald, 1998;Hout and Rosen, 2000;Reynolds et al, 2001). For instance, in a very recent paper Burke, FitzRoy and Nolan (1989) found that the initial level of assets strongly influences the probability of self-employment (see also Blanchflower and Osvald, 1998;Cabral and Mata, 2003;Hurst and Lusardi, 2004;Kan and Tsai, 2006). Other studies have examined the probability of transition to self-employment after an unexpected financial gain, such as a lottery prize, a windfall gain or a job bonus.…”

mentioning

confidence: 99%

Entrepreneurship and the process of firms' entry, survival and growth

Santarelli¹,

Vivarelli²

2007

Industrial and Corporate Change

View full text Add to dashboard Cite

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. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes.You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. licence. www.econstor.eu IZA DP No. 2475 Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated Entrepreneurship and the Process of Firms' Entry, Survival and Growth Enrico Santarelli Marco Vivarelli D I S C U S S I O N P A P E R S E R I E SThe 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 company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. 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.IZA 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. ABSTRACT Entrepreneurship and the Process of Firms' Entry, Survival and GrowthThis survey paper aims at critically discussing the recent literature on firm formation and survival and the growth of new-born firms. The basic purpose is to single out the microeconomic entrepreneurial foundations of industrial dynamics (entry and exit) and to characterise the founder's ex-ante features in terms of likely ex-post business performance. The main conclusion is that entry of new firms is heterogeneous with innovative entrepreneurs being found together with passive followers, over-optimist gamblers and even escapees from unemployment. Since founders are heterogeneous and may make "entry mistakes", policy incentives sh...

show abstract

“…As Cressy (2000) shows, an alternative theoretical explanation for the finding that more wealthy agents choose to become entrepreneurs may be that absolute risk aversion decreases with wealth. Hurst and Lusardi (2004) reestimate the empirical relationship between wealth and the entry probability using the U.S. Panel Study of Income Dynamics. They report that this relationship is not significant throughout most of the wealth distribution, and that a positive correlation exists only for the top 5 percent of the wealthiest households.…”

Section: Liquidity Constraints As a Possible Explanationmentioning

confidence: 99%

“…Disney and Gathergood (2009) account for the critique of Hurst and Lusardi (2004) in their empirical analysis and conclude that the evidence for financial constraints is weak in the United Kingdom as well. Cosh et al (2009) use survey data on 2,520 entrepreneurial firms in the United Kingdom and find that the firms that seriously sought external finance were able to obtain, on average, 84.5 percent of the desired capital; the median was even 100 percent.…”

Section: Liquidity Constraints As a Possible Explanationmentioning

confidence: 99%

Risk Attitudes and Private Business Equity

Fossen¹

2012

Oxford Handbooks Online

1

0

View full text Add to dashboard Cite

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. Terms of use: Documents in EconStor may Abstract:Why do people engage in entrepreneurship and commit large parts of their personal wealth to their business, despite comparably low returns and high risk? This paper connects several streams of literature to shed some light on this puzzle and suggests possible future research avenues. Key insights from the literature are that entrepreneurs may operate in imperfect financial markets and that entrepreneurs are less risk-averse than the rest of the population. A focus of this paper is, therefore, on the role of heterogeneous risk attitudes in entrepreneurial decisions, specifically portfolio choice and the entry and exit decisions. Nonpecuniary benefits of entrepreneurship, such as being independent in the workplace, also contribute to an explanation of entrepreneurial behavior.

show abstract

Liquidity Constraints, Household Wealth, and Entrepreneurship

Cited by 1,080 publications

References 16 publications

Determinants of entrepreneurial engagement levels in Europe and the US

Determinants of entrepreneurial engagement levels in Europe and the US

Entrepreneurship and the process of firms' entry, survival and growth

Risk Attitudes and Private Business Equity

Contact Info

Product

Resources

About