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Liquidity, Risk, and Occupational Choices

Author

Listed:
  • Milo Bianchi

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

  • Matteo Bobba

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

We explore which financial constraints matter the most in the choice of becoming an entrepreneur. We consider a randomly assigned welfare program in rural Mexico and show that cash transfers signi cantly increase entry into entrepreneurship. We then exploit the cross-household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received. Guided by a simple occupational choice model, we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints.

Suggested Citation

  • Milo Bianchi & Matteo Bobba, 2013. "Liquidity, Risk, and Occupational Choices," Post-Print hal-01629743, HAL.
    • Handle: RePEc:hal:journl:hal-01629743
    DOI: 10.1093/restud/rds031
    Note: View the original document on HAL open archive server: https://hal.science/hal-01629743
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    References listed on IDEAS

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