IDEAS home Printed from https://ideas.repec.org/p/lvl/criacr/1607.html
   My bibliography  Save this paper

Self-Employment, Wealth and Start-up Costs: Evidence from a Financial Crisis

Author

Listed:
  • Koffi Elitcha
  • Raquel Fonseca

Abstract

Financial constraints affect individuals’ decision to become self-employed, suggesting a positive relationship between the propensity to become entrepreneur and personal wealth. Recent evidence confirms this hypothesis, and shows that the importance of the entrepreneurship—wealth relationship increases with the extent of liquidity constraints and flattens with the magnitude of start-up costs. Using individual-level data from 3 European and U.S. surveys as well as the World Bank, we investigate the impact of start-up costs on the self-employment—wealth relationship. Results confirm the strong positive relationship between entrepreneurial choice and wealth, as well as the negative effect stemming from an increase in start-up costs. Although there is no strong evidence that wealth in itself played a bigger role during the last global financial crisis, the negative impact of higher start-up costs on wealth proved significant.

Suggested Citation

  • Koffi Elitcha & Raquel Fonseca, 2016. "Self-Employment, Wealth and Start-up Costs: Evidence from a Financial Crisis," Cahiers de recherche 1607, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
  • Handle: RePEc:lvl:criacr:1607
    as

    Download full text from publisher

    File URL: https://www.cedia.ca/sites/cedia.ca/files/cahier_16-07_self_employment.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:hrv:faseco:30747190 is not listed on IDEAS
    2. Lee Branstetter & Francisco Lima & Lowell J. Taylor & Ana Venâncio, 2014. "Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal," Economic Journal, Royal Economic Society, vol. 124(577), pages 805-832, June.
    3. Fonseca, Raquel & Michaud, Pierre-Carl & Sopraseuth, Thepthida, 2007. "Entrepreneurship, Wealth, Liquidity Constraints and Start-up Costs," IZA Discussion Papers 2874, Institute for the Study of Labor (IZA).
    4. Davud Rostam-Afschar, 2014. "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship," Empirical Economics, Springer, vol. 47(3), pages 1067-1101, November.
    5. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    6. 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.
    7. Ellen R. Rissman, 2007. "Labor market transitions and self-employment," Working Paper Series WP-07-14, Federal Reserve Bank of Chicago.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Self-Employment; Occupational Choice; Wealth; Liquidity Constraints; Start-up Costs; Financial Crisis;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lvl:criacr:1607. 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: (Manuel Paradis). General contact details of provider: http://edirc.repec.org/data/cediaca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.