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The Wealth Effect on New Business Startups in a Developing Economy

  • ALICE MESNARD
  • MARTIN RAVALLION

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.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 73 (2006)
Issue (Month): 291 (08)
Pages: 367-392

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Handle: RePEc:bla:econom:v:73:y:2006:i:291:p:367-392
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