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Savings of Entrepreneurs

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  • Asena Caner

Abstract

Previous work on entrepreneurship and wealth has documented that entrepreneurial households are wealthier and have higher wealth mobility. However, the literature has not paid attention to the components of wealth change. Furthermore, endogeneity problems in the measurement of the interaction between saving rates and entrepreneurship are not well addressed. In this paper, by reexamining the relationship between entrepreneurship and household wealth more rigorously, I show that while entrepreneurial households save more out of their income, it is not true that they experience higher rates of wealth increase or capital gains. In my analyses, I control for the endogeneity between the decision to start a business and household savings. I find some evidence that the decision to become a business owner is endogenous to the rate of capital gains and to the rate of saving (out of income). My results also show that households do not save more in order to start a business. Therefore, the evidence suggests that business owners save more, but not that those who save more become business owners.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_390.

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Date of creation: Sep 2003
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Handle: RePEc:lev:wrkpap:wp_390

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  1. Cressy, Robert, 2000. "Credit rationing or entrepreneurial risk aversion? An alternative explanation for the Evans and Jovanovic finding," Economics Letters, Elsevier, vol. 66(2), pages 235-240, February.
  2. Edward N. Wolff, . "Racial Wealth Disparities Is the Gap Closing?," Economics Public Policy Brief Archive ppb_66, Levy Economics Institute.
  3. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  4. William M. Gentry & R. Glenn Hubbard, 2000. "Entrepreneurship and Household Saving," NBER Working Papers 7894, National Bureau of Economic Research, Inc.
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