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Entrepreneurship and Liquidity Constraints: Evidence from Sweden

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  • Jenny Nykvist

Abstract

Hurst and Lusardi (2004) use a specification with higher‐order polynomials to estimate the relationship between wealth and entrepreneurship. They find evidence against the existence of extensive liquidity constraints in the United States. In this paper, their approach is replicated on Swedish data. A positive relationship between wealth and entrepreneurship is found, which supports the liquidity constraints hypothesis. Alternative methods for handling the endogeneity problem and distinguishing between absolute decreasing risk aversion and liquidity constraints lend further support to the hypothesis. The analysis suggests that there exist liquidity constraints in Sweden, which are possibly more extensive than in the United States.

Suggested Citation

  • Jenny Nykvist, 2008. "Entrepreneurship and Liquidity Constraints: Evidence from Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 23-43, March.
    • Handle: RePEc:bla:scandj:v:110:y:2008:i:1:p:23-43
    DOI: 10.1111/j.1467-9442.2008.00523.x
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    References listed on IDEAS

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