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Funding Self-Employment - The Role of Consumer Credit

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  • Christoph Kneiding

    ()
    (GfA, Berlin)

  • Alexander S. Kritikos

    ()
    (GfA, Berlin & Europa-Universität Viadrina, Frankfurt (Oder))

Abstract

In this paper we investigate whether self-employed households use consumer loans to finance their business activities. In particular, it is shown that self-employed households use personal overdrafts significantly more often than employee households do. This difference remains when controlling for financial and non-financial household variables: a discrete change from wage employment to self-employment results in an average rise in overdraft usage of 14.1%. These findings are corroborated when analyzing the correlation between consumer loan take-ups and consumption of self-employed households. Intermingling of personal and business resources is more likely when the household is credit constrained; when the household head is younger; and when financial assets within the household are lower.

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Bibliographic Info

Paper provided by Gesellschaft für Arbeitsmarktaktivierung (GfA) in its series Working Papers with number 0007.

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Length: 22 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:gfa:wpaper:0007

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Keywords: Small Business Finance; Consumer Credit; Financial Intermingling;

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References

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Cited by:
  1. Kritikos, Alexander S. & Kneiding, Christoph & Germelmann, Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," IZA Discussion Papers 4292, Institute for the Study of Labor (IZA).
  2. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.

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