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The Wealth Effect on New Business Startups in a Developing Economy

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  • ALICE MESNARD
  • MARTIN RAVALLION

Abstract

The paper tests for nonlinearities in the wealth effect on self-employment, as can arise from startup costs or liquidity constraints. Using both nonparametric and parametric methods, we show that the relationship between the probability of a return migrant to Tunisia starting up a business and the stock of his savings repatriated at return is concave for almost the entire range of our data, though we find weak evidence of a convex relationship at very low wealth levels. Our results suggest that the aggregate self-employment rate is an increasing function of aggregate wealth, but a decreasing function of wealth inequality. Copyright (c) The London School of Economics and Political Science 2006.

Suggested Citation

  • Alice Mesnard & Martin Ravallion, 2006. "The Wealth Effect on New Business Startups in a Developing Economy," Economica, London School of Economics and Political Science, vol. 73(291), pages 367-392, August.
  • Handle: RePEc:bla:econom:v:73:y:2006:i:291:p:367-392
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    Cited by:

    1. Batista, Catia & McIndoe Calder, Tara & Vicente, Pedro C., 2014. "Return Migration, Self-Selection and Entrepreneurship in Mozambique," IZA Discussion Papers 8195, Institute for the Study of Labor (IZA).
    2. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," IZA Discussion Papers 3035, Institute for the Study of Labor (IZA).
    3. Gries Thomas & Naude Wim, 2011. "Entrepreneurship, Structural Change and a Global Economic Crisis," Entrepreneurship Research Journal, De Gruyter, vol. 1(3), pages 1-43, July.
    4. Wahba, Jackline & Zenou, Yves, 2012. "Out of sight, out of mind: Migration, entrepreneurship and social capital," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 890-903.
    5. Talip Kilic & Calogero Carletto & Benjamin Davis & Alberto Zezza, 2009. "Investing back home," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 587-623, July.
    6. Martin Ravallion, 2012. "Fighting Poverty One Experiment at a Time: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty : Review Essay," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 103-114, March.
    7. Catia Batista & Aitor Lacuesta & Pedro Vicente, 2009. "Micro evidence of the brain gain hypothesis: The case of Cape Verde," Working Papers 0902, Banco de España;Working Papers Homepage.
    8. Elisabetta LODIGIANI, 2009. "Diaspora Externalities as a Cornerstone of the New Brain Drain Literature," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009036, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    9. Martin Ravallion, 2012. "Why Don't We See Poverty Convergence?," American Economic Review, American Economic Association, vol. 102(1), pages 504-523, February.
    10. Slobodan Djaji, 2011. "Reforming the System of International Migration," Chapters,in: International Handbook on the Economics of Integration, Volume III, chapter 8 Edward Elgar Publishing.
    11. Catia Batista & Julia Seither & Pedro C. Vicente, 2017. "Migration, political institutions, and social networks," NOVAFRICA Working Paper Series wp1701, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.
    12. Almeida, Rita K. & Galasso, Emanuela, 2010. "Jump-starting Self-employment? Evidence for Welfare Participants in Argentina," World Development, Elsevier, vol. 38(5), pages 742-755, May.
    13. Catia Batista & Pedro C. Vicente, 2011. "Do Migrants Improve Governance at Home? Evidence from a Voting Experiment," World Bank Economic Review, World Bank Group, vol. 25(1), pages 77-104, May.
    14. Djajić, Slobodan & Vinogradova, Alexandra, 2015. "Overshooting the Savings Target: Temporary Migration, Investment in Housing and Development," World Development, Elsevier, vol. 65(C), pages 110-121.
    15. Almeida, Rita K. & Galasso, Emanuela, 2007. "Jump-Starting Self-Employment? Evidence among Welfare Participants in Argentina," IZA Discussion Papers 2902, Institute for the Study of Labor (IZA).
    16. Catia Batista & Julia Seither & Pedro C. Vicente, 2017. "Migration, political institutions, and social networks," FEUNL Working Paper Series novaf:wp1701, Universidade Nova de Lisboa, Faculdade de Economia.
    17. repec:bla:obuest:v:79:y:2017:i:5:p:797-821 is not listed on IDEAS
    18. Martin Ravallion, 2013. "The Idea of Antipoverty Policy," NBER Working Papers 19210, National Bureau of Economic Research, Inc.

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