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The Opposing Effects of Wealth on Younger and Older Entrepreneurs

Author

Listed:
  • Philippe d’Astous

  • Vyacheslav Mikhed
  • Sahil Raina
  • Barry Scholnick

Abstract

Using wealth windfalls from lottery winnings and matched employer-employee tax files, we compare the effect of additional wealth on the entrepreneurial activity of older and younger individuals. We find that additional wealth leads older winners (aged 55 to 64) to reduce business ownership and growth (as measured by sales, revenue, and employees). In contrast, extra wealth increases younger winners’ (aged 21 to 54) business ownership, but it has no effect on their business growth. The increase in business activity of a young winner does not offset the negative growth for an older winner, which may hurt economic growth.

Suggested Citation

  • Philippe d’Astous & Vyacheslav Mikhed & Sahil Raina & Barry Scholnick, 2025. "The Opposing Effects of Wealth on Younger and Older Entrepreneurs," Working Papers 25-32, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:101992
    DOI: 10.21799/frbp.wp.2025.32
    Note: Supersedes Working Paper 25-03 – How Wealth and Age Interact to Affect Entrepreneurship
    as

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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2025/wp25-32.pdf
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    References listed on IDEAS

    as
    1. Pierre Azoulay & Benjamin F. Jones & J. Daniel Kim & Javier Miranda, 2020. "Age and High-Growth Entrepreneurship," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 65-82, March.
    2. Kyle Herkenhoff & Gordon Phillips & Ethan Cohen-Cole, 2024. "How Credit Constraints Impact Job Finding Rates, Sorting, and Aggregate Output," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(5), pages 2832-2877.
    3. Karthik Krishnan & Pinshuo Wang, 2019. "The Cost of Financing Education: Can Student Debt Hinder Entrepreneurship?," Management Science, INFORMS, vol. 65(10), pages 4522-4554, October.
    4. John Bailey Jones & Sangeeta Pratap, 2020. "An Estimated Structural Model of Entrepreneurial Behavior," American Economic Review, American Economic Association, vol. 110(9), pages 2859-2898, September.
    5. Lingxiao Zhao & Gregory Burge, 2017. "Housing Wealth, Property Taxes, and Labor Supply among the Elderly," Journal of Labor Economics, University of Chicago Press, vol. 35(1), pages 227-263.
    6. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G5 - Financial Economics - - Household Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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