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Funding Self-Employment – The Role of Consumer Credit

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Abstract

In this paper we investigate whether consumer loans are used to finance business activities. We show that self-employed households particularly use personal overdrafts significantly more often than employee households. The difference remains when controlling for financial and non-financial household variables. Our 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; when the household head’s partner is employed; and when financial assets within the household are lower.

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  • Christoph Kneiding & Alexander S. Kritikos, 2008. "Funding Self-Employment – The Role of Consumer Credit," Working Papers 005, Hanseatic University, Germany, Department of Economics.
    • Handle: RePEc:phu:wpaper:005
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    Cited by:

    1. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, vol. 49(2), pages 251-272, August.
    2. Tia Michelle McDonald & Maria I. Marshall, 2018. "Family Business Responses to Household and Business Cash-Flow Problems," Journal of Family and Economic Issues, Springer, vol. 39(1), pages 163-176, March.
    3. Kritikos Alexander & Kneiding Christoph & Germelmann Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(5), pages 523-543, October.
    4. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
    5. Xu, Nana & Yuan, Yan & Rong, Zhao, 2022. "Depressed access to formal finance and the use of credit card debt in Chinese SMEs," China Economic Review, Elsevier, vol. 72(C).
    6. Renee D. Wiatt & Yoon G. Lee & Maria I. Marshall & Virginia S. Zuiker, 2021. "The Effect of Cash Flow Problems and Resource Intermingling on Small Business Recovery and Resilience After a Natural Disaster," Journal of Family and Economic Issues, Springer, vol. 42(1), pages 203-214, March.

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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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