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Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links

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  • Dunn, Thomas
  • Holtz-Eakin, Douglas

Abstract

We use data from the National Longitudinal Surveys to investigate the relative importance of family financial and human capital in the transition into self-employment. Specifically, we estimate the impacts of individual's own wealth and human capital and parental wealth and self-employment experience on the probability that an individual transits from wage-and-salary to self-employment. We find young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition. In contrast, the parents' capital exerts a large influence. Parents' strongest effect runs, not through financial means, but rather through their own self-employment experience and business success. Copyright 2000 by University of Chicago Press.

Suggested Citation

  • Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
  • Handle: RePEc:ucp:jlabec:v:18:y:2000:i:2:p:282-305
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    References listed on IDEAS

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    1. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 334-347, Summer.
    2. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-1198, December.
    3. Devine, Theresa J, 1994. "Changes in Wage-and-Salary Returns to Skill and the Recent Rise in Female Self-Employment," American Economic Review, American Economic Association, vol. 84(2), pages 108-113, May.
    4. Cox, Donald & Jappelli, Tullio, 1990. "Credit Rationing and Private Transfers: Evidence from Survey Data," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 445-454, August.
    5. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
    6. Engelhardt, Gary V. & Mayer, Christopher J., 1998. "Intergenerational Transfers, Borrowing Constraints, and Saving Behavior: Evidence from the Housing Market," Journal of Urban Economics, Elsevier, vol. 44(1), pages 135-157, July.
    7. Victor R. Fuchs, 1982. "Self-Employment and Labor Force Participation of Older Males," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 339-357.
    8. 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 808-827, August.
    9. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
    10. 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.
    11. Donald Cox, 1990. "Intergenerational Transfers and Liquidity Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 187-217.
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