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Part-Time Entrepreneurship and Wealth Effects: New Evidence from the Panel Study of Entrepreneurial Dynamics

  • Kameliia Petrova

    (Boston College)

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    Why do people become part-time entrepreneurs? Are they credit constrained? Previous studies on entrepreneurship do not deal with part- timers. In contrast, a recent survey on the establishment of new businesses reports that 80 percent of nascent entrepreneurs also hold regular wage jobs. I develop a model of entrepreneurial choice in which individuals decide not only how much capital to invest, but also what proportion of time to spend in business. The model allows me to test whether entrepreneurs are credit constrained. I use a new and unique data set, which looks at how nascent entrepreneurs divide their time between their own businesses and other jobs. My empirical findings show that part-time entrepreneurs do not appear to be constrained. This is not to say that no entrepreneur is credit constrained. It might be that a lot of part-time business owners operate in less capital intensive sectors. Instead, the result points to the marginal entrepreneur. If credit constraints are crucial, wealthier entrepreneurs should shift their time a lot more into their businesses, because the credit constraints would have been relaxed.

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    Paper provided by EconWPA in its series Microeconomics with number 0510006.

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    Length: 31 pages
    Date of creation: 10 Oct 2005
    Date of revision: 03 Nov 2005
    Handle: RePEc:wpa:wuwpmi:0510006
    Note: Type of Document - pdf; pages: 31
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