Journal ArticleDOI
An Estimated Model of Entrepreneurial Choice under Liquidity Constraints
David S. Evans,Boyan Jovanovic +1 more
TLDR
The authors show that the data point to liquidity constraints: capital is essential for starting a business, and liquidity constraints tend to exclude those with insufficient funds at their disposal, and a would-be entrepreneur must bear most of the risk inherent in his venture.Abstract:
Is the capital function distinct from the entrepreneurial function in modern economies? Or does a person have to be wealthy before he or she can start a business? Knight and Schumpeter held different views on the answer to this question. Our empirical findings side with Knight: Liquidity constraints bind, and a would-be entrepreneur must bear most of the risk inherent in his venture. The reasoning is roughly this: The data show that wealthier people are more inclined to become entrepreneurs. In principle, this could be so because the wealthy tend to make better entrepreneurs, but the data reject this explanation. Instead, the data point to liquidity constraints: capital is essential for starting a business, and liquidity constraints tend to exclude those with insufficient funds at their disposal.read more
Citations
More filters
Posted Content
Housing Collateral, Credit Constraints and Entrepreneurship - Evidence from a Mortgage Reform
TL;DR: In this article, the authors study how a mortgage reform that exogenously increased access to credit had an impact on entrepreneurship, using individual-level micro data from Denmark and find that a $30,000 increase in credit availability led to a 12 basis point increase in entrepreneurship, equivalent to a 4% increase in the number of entrepreneurs.
Journal ArticleDOI
Prospect theory and the effects of bankruptcy laws on entrepreneurial aspirations
TL;DR: In this paper, the authors apply prospect theory to explain how personal and corporate bankruptcy laws affect risk perceptions of entrepreneurs at time of entry and therefore their growth ambitions, and derive and confirm hypotheses about the impact of aspects of bankruptcy codes on entrepreneurial activity using the Global Entrepreneurship Monitor combined with data on both personal and Corporate bankruptcy regulations for 15 developed OECD countries.
Journal ArticleDOI
Racial differences in self-employment exits
TL;DR: This article investigated the reasons behind the racial gap in self-employment and found that minority workers' relatively high exit rates are driven primarily by transitions to non-employment, while lack of prior industry and self employment experience contributes to minorities' transitions to wage employment.
Journal ArticleDOI
Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?
TL;DR: This article disaggregated the self-employed into incorporated and unincorporated to distinguish between "entrepreneurs" and other business owners, and found that the incorporated owners have a distinct combination of cognitive, non-cognitive, and family traits.
Journal ArticleDOI
The spirit of capitalism? Ethnicity, religion, and self-employment in early 20th century Canada
Chris Minns,Marian Rizov +1 more
TL;DR: This article examined self-employment in Canada at the beginning of the 20th century and found strong evidence of immigrant assimilation and modest evidence of higher selfemployment in enclaves with greater concentration of immigrants.
References
More filters
Book
The theory of economic development
TL;DR: Buku ini memberikan infmasi tentang aliran melingkar kehidupan ekonomi sebagaimana dikondisikan oleh keadaan tertentu, fenomena fundamental dari pembangunan EKonomi, kredit, laba wirausaha, bunga atas modal, and siklus bisnis as mentioned in this paper.
Posted ContentDOI
Credit Rationing in Markets with Imperfect Information.
Joseph E. Stiglitz,Andrew Weiss +1 more
TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.
Book
Risk, Uncertainty and Profit
TL;DR: In Risk, Uncertainty and Profit, Frank Knight explored the riddle of profitability in a competitive market profit should not be possible under competitive conditions, as the entry of new entrepreneurs would drive prices down and nullify margins, however evidence abounds of competitive yet profitable markets as mentioned in this paper.
Journal ArticleDOI
The theory of economic development
Posted Content
Competition and Entrepreneurship
TL;DR: Kirzner as discussed by the authors argues that the assumption of perfect knowledge is unrealistic and argues that every market participant is a potential entrepreneur who can exploit a situation, which depends on a lack of perfect information among the market participants.