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Funding Self-Employment: The Role of Consumer Credit

Author

Listed:
  • Kneiding, Christoph

    () (LFS Financial Systems)

  • Kritikos, Alexander S.

    () (DIW Berlin)

Abstract

This paper investigates whether self-employed households use consumer loans – in particular instalment loans and overdrafts – to finance business activities. Controlling for financial and non-financial household variables we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analyzing the correlation between consumer loan take-ups and consumption of self-employed in comparison to employee households, we find first evidence that overdrafts are used by self-employed to finance their business as well. This indicates that intermingling constitutes a financing strategy when regular business loans might not be accessible.

Suggested Citation

  • Kneiding, Christoph & Kritikos, Alexander S., 2011. "Funding Self-Employment: The Role of Consumer Credit," IZA Discussion Papers 6093, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6093
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    References listed on IDEAS

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    1. Kritikos Alexander & Kneiding Christoph & Germelmann Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(5), pages 523-543, October.
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    Cited by:

    1. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-017-9874-6 is not listed on IDEAS
    2. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
    3. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, vol. 49(2), pages 251-272, August.
    4. Kritikos Alexander & Kneiding Christoph & Germelmann Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(5), pages 523-543, October.
    5. repec:kap:jfamec:v:39:y:2018:i:1:d:10.1007_s10834-017-9543-6 is not listed on IDEAS

    More about this item

    Keywords

    small business finance; financial intermingling; consumer credit;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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