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Funding Self-Employment - The Role of Consumer Credit

  • Christoph Kneiding


    (GfA, Berlin)

  • Alexander S. Kritikos


    (GfA, Berlin & Europa-Universität Viadrina, Frankfurt (Oder))

In this paper we investigate whether self-employed households use consumer loans to finance their business activities. In particular, it is shown that self-employed households use personal overdrafts significantly more often than employee households do. This difference remains when controlling for financial and non-financial household variables: a discrete change from wage employment to self-employment results in an average rise in overdraft usage of 14.1%. These findings are corroborated when analyzing the correlation between consumer loan take-ups and consumption of self-employed households. Intermingling of personal and business resources is more likely when the household is credit constrained; when the household head is younger; and when financial assets within the household are lower.

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Paper provided by Gesellschaft für Arbeitsmarktaktivierung (GfA) in its series Working Papers with number 0007.

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Length: 22 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:gfa:wpaper:0007
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