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Part-Time Entrepreneurship and Wealth Effects: New Evidence from the Panel Study of Entrepreneurial Dynamics

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Author Info
Kameliia Petrova (Boston College)

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Abstract

Why do people become part-time entrepreneurs? Are they credit constrained? Previous studies on entrepreneurship do not deal with part- timers. In contrast, a recent survey on the establishment of new businesses reports that 80 percent of nascent entrepreneurs also hold regular wage jobs. I develop a model of entrepreneurial choice in which individuals decide not only how much capital to invest, but also what proportion of time to spend in business. The model allows me to test whether entrepreneurs are credit constrained. I use a new and unique data set, which looks at how nascent entrepreneurs divide their time between their own businesses and other jobs. My empirical findings show that part-time entrepreneurs do not appear to be constrained. This is not to say that no entrepreneur is credit constrained. It might be that a lot of part-time business owners operate in less capital intensive sectors. Instead, the result points to the marginal entrepreneur. If credit constraints are crucial, wealthier entrepreneurs should shift their time a lot more into their businesses, because the credit constraints would have been relaxed.

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Publisher Info
Paper provided by EconWPA in its series Microeconomics with number 0510006.

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Length: 31 pages
Date of creation: 10 Oct 2005
Date of revision: 03 Nov 2005
Handle: RePEc:wpa:wuwpmi:0510006

Note: Type of Document - pdf; pages: 31
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Web page: http://129.3.20.41

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Related research
Keywords: Start-ups; Entrepreneurship; Liquidity Constraints;

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Find related papers by JEL classification:
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups

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References listed on IDEAS
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  5. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February. [Downloadable!] (restricted)
    Other versions:
  6. John Bound & David A. Jaeger & Regina Baker, 1993. "The Cure Can Be Worse than the Disease: A Cautionary Tale Regarding Instrumental Variables," NBER Technical Working Papers 0137, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  8. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January. [Downloadable!] (restricted)
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  9. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
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  15. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jeffrey Campbell & Mariacristina De Nardi, 2009. "A conversation with 590 Nascent Entrepreneurs," Annals of Finance, Springer, vol. 5(3), pages 313-340, June. [Downloadable!] (restricted)
    Other versions:
  2. Berna Demiralp & Johanna Francis, 2008. "Wealth, Industry and the Transition to Entrepreneurship," Fordham Economics Discussion Paper Series dp2008-09, Fordham University, Department of Economics. [Downloadable!]
  3. Dorothea Schäfer & Oleksandr Talavera, 2005. "Entrepreneurship, Windfall Gains and Financial Constraints: The Case of Germany," Discussion Papers of DIW Berlin 480, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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