Entrepreneurship, Windfall Gains and Financial Constraints: The Case of Germany
AbstractIn this paper we investigate the link between entrepreneurship and financial constraints. We develop a dynamic partial equilibrium model of an individual utility maximization that predicts that the person is more likely to start her business when financial constraints are eased. We test this hypothesis using German Socio-Economic Panel data covering the periods 2000 - 2002 and measure release from financial constraints by windfall gains. The estimates confirm that the individual has higher propensity to start her business when she gets windfall gains. Furthermore, there are stronger effects for persons that have sufficient, but not very high levels of income and abilities.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 480.
Length: 25 p.
Date of creation: 2005
Date of revision:
Entrepreneurship; Windfall gains; Financial constraints;
Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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