Small-Scale Business Survival and Inheritance: Evidence from Germany
In this paper we investigate whether small-scale businesses face financial constraints that affect their survival. We develop a model of moral hazard in which financial constraints arise endogenously. The model predicts that higher private assets relax financial constraints and have a positive effect on the firm's probability of survival. We test this proposition using German Socio-Economic Panel (GSOEP) data, which cover the period 1984-2004. The release from financial constraints is measured by inheritance. The empirical analysis confirms that the entrepreneur has a higher propensity to stay in business when she inherits capital. This effect is particularly strong for entrepreneurs that switch from self-employment into wage employment. These results are consistent with hypothesis that financial frictions have a perceptible impact on bankruptcy among small business firms.
|Date of creation:||2006|
|Contact details of provider:|| Postal: Mohrenstraße 58, D-10117 Berlin|
Web page: http://www.diw.de/en
More information through EDIRC
References listed on IDEAS
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.:
- Meyer, Bruce D, 1990.
"Unemployment Insurance and Unemployment Spells,"
Econometric Society, vol. 58(4), pages 757-782, July.
- Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
- Robert Cressy, 2006. "Why do Most Firms Die Young?," Small Business Economics, Springer, vol. 26(2), pages 103-116, March.
- 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.
- Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
- Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Working Papers 698, Princeton University, Department of Economics, Industrial Relations Section..
- 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.
- Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 825-852.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," Scholarly Articles 12490416, Harvard University Department of Economics.
- Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1999. "Competition, financial discipline and growth," ULB Institutional Repository 2013/9619, ULB -- Universite Libre de Bruxelles.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," CEPR Discussion Papers 2128, C.E.P.R. Discussion Papers.
- Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
- Carrasco, Raquel, 1999. " Transitions to and from Self-employment in Spain: An Empirical Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 315-341, August.
- Carrasco, R., 1997. "Transitions to and from Self-Employment in Spain: An Empirical Analysis," Papers 9710, Centro de Estudios Monetarios Y Financieros-.
- Besanko, David & Thakor, Anjan V, 1987. "Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 671-689, October.
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Holtz-Eakin Douglas & Rosen Harvey S, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, February.
- Douglas Holtz-Eakin & Harvey Rosen, 1999. "Cash Constraints and Business Start-ups: Deutschmarks versus Dollars," Center for Policy Research Working Papers 11, Center for Policy Research, Maxwell School, Syracuse University.
- Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-744, Winter.
- Amelie Constant & Klaus Zimmermann, 2006. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," Small Business Economics, Springer, vol. 26(3), pages 279-300, April.
- Constant, Amelie F. & Zimmermann, Klaus F., 2004. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," IZA Discussion Papers 1440, Institute for the Study of Labor (IZA).
- 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.
- Taylor, Mark P, 1999. "Survival of the Fittest? An Analysis of Self-Employment Duration in Britain," Economic Journal, Royal Economic Society, vol. 109(454), pages 140-155, March.
- C. Mirjam van Praag, 2003. "Business Survival and Success of Young Small Business Owners," Tinbergen Institute Discussion Papers 03-050/3, Tinbergen Institute.
- Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
- Cressy, Robert & Olofsson, Christer, 1997. "European SME Financing: An Overview," Small Business Economics, Springer, vol. 9(2), pages 87-96, April.
- Black, Jane & de Meza, David & Jeffreys, David, 1996. "House Price, the Supply of Collateral and the Enterprise Economy," Economic Journal, Royal Economic Society, vol. 106(434), pages 60-75, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp636. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek)
If references are entirely missing, you can add them using this form.