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Household Inequality, Entrepreneurial Dynamism, and Corporate Financing
[The colonial origins of comparative development: An empirical investigation]

Author

Listed:
  • Fabio Braggion
  • Mintra Dwarkasing
  • Steven Ongena

Abstract

Economic theories posit conflicting hypotheses on how wealth inequality affects entrepre-neurial dynamism. We investigate the impact of wealth inequality on business dynamics by constructing local measures of household wealth inequality based on financial rents, home equity, and 1880 farmland. We then identify the effect of wealth inequality on entrepre-neurship by instrumenting it with land distribution under the 1862 Homestead Act. Wealth inequality decreases firm entry and exit, and the proportion of high-tech businesses across metropolitan statistical areas. Wealth inequality also lowers the supply of public goods, such as education. Growth in income per capita consequently lags.

Suggested Citation

  • Fabio Braggion & Mintra Dwarkasing & Steven Ongena, 2021. "Household Inequality, Entrepreneurial Dynamism, and Corporate Financing [The colonial origins of comparative development: An empirical investigation]," The Review of Financial Studies, Society for Financial Studies, vol. 34(5), pages 2448-2507.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:5:p:2448-2507.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa097
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    Cited by:

    1. Robert Fairlie & Alicia Robb & David T. Robinson, 2022. "Black and White: Access to Capital Among Minority-Owned Start-ups," Management Science, INFORMS, vol. 68(4), pages 2377-2400, April.
    2. Albert, Christoph & Caggese, Andrea & González, Beatriz & Martin-Sanchez, Victor, 2023. "Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession," Journal of Banking & Finance, Elsevier, vol. 149(C).
    3. Fabio Braggion & Mintra Dwarkasing & Steven Ongena, 2018. "Household wealth inequality, entrepreneurs’ financial constraints, and the great recession: evidence from the Kauffman Firm Survey," Small Business Economics, Springer, vol. 50(3), pages 533-543, March.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G3 - Financial Economics - - Corporate Finance and Governance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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