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Entrepreneurship and Liquidity Constraints: Evidence from Sweden
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2008 (English)In: Scandinavian Journal of Economics, ISSN 0347-0520, E-ISSN 1467-9442, Vol. 110, no 1, 23-43 p.Article in journal (Refereed) Published
Abstract [en]

Hurst and Lusardi (2004) use a specification with higher-order polynomials to estimate the relationship between wealth and entrepreneurship. They find evidence against the existence of extensive liquidity constraints in the United States. In this paper, their approach is replicated on Swedish data. A positive relationship between wealth and entrepreneurship is found, which supports the liquidity constraints hypothesis. Alternative methods for handling the endogeneity problem and distinguishing between absolute decreasing risk aversion and liquidity constraints lend further support to the hypothesis. The analysis suggests that there exist liquidity constraints in Sweden, which are possibly more extensive than in the United States.

Place, publisher, year, edition, pages
2008. Vol. 110, no 1, 23-43 p.
Keyword [en]
Entrepreneurship, Liquidity constraints, Self-employment, Wealth
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:uu:diva-96789DOI: 10.1111/j.1467-9442.2008.00523.xISI: 000255663300002OAI: oai:DiVA.org:uu-96789DiVA: diva2:171478
Available from: 2008-02-21 Created: 2008-02-21 Last updated: 2017-12-14Bibliographically approved
In thesis
1. Self-employment Entry and Survival: Evidence from Sweden
Open this publication in new window or tab >>Self-employment Entry and Survival: Evidence from Sweden
2008 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Essay 1: Hurst and Lusardi (2004) use higher-order polynomials in wealth in estimating the relationship with entrepreneurship. They find evidence conflicting with the existence of extensive liquidity constraints in the United States. In this paper, their approach is replicated on Swedish data. A positive relationship between wealth and entrepreneurship is found, which supports the liquidity constraints hypothesis. Alternative methods attempting to handle the endogeneity problem and distinguish between absolute decreasing risk aversion and liquidity constraints give further support to the hypothesis. The paper suggests that there exist liquidity constraints in Sweden, which are possibly more extensive than in the United States.

Essay 2: Displacement is expected to decrease the reservation wage of self-employment by decreasing earnings in paid employment and increasing the probability of unemployment. This paper examines whether displacement increases the probability of self-employment using propensity score matching on Swedish register-based data. The data include all individuals displaced due to plant closures in 1987 and 1988, and a random sample of 200,000 employed individuals. The results suggest that displacement almost doubles the probability of entering self-employment the year after displacement. A sub-sample analysis indicates that individuals with a potentially worse position on the labor market react more strongly to displacement in terms of entering self-employment.

Essay 3: A large literature has studied the effect of displacement on labor market outcomes in general, but no one has evaluated how the displaced succeed as self-employed. This paper studies how the survival of the business is affected by displacement in connection to entry, using a discrete-time proportional hazard model on a matched sample of displaced and non-displaced individuals. The main result of the paper is that, as a consequence of previous displacement, the probability of switching from self-employment to paid employment decreases and the probability of switching to unemployment is unaffected.

Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen, 2008. 94 p.
Series
Economic studies, ISSN 0283-7668 ; 109
Keyword
Self-employment, entrepreneurship, liquidity constraints, wealth, displacement, plant closure, survival, success
National Category
Economics
Identifiers
urn:nbn:se:uu:diva-8478 (URN)978-91-85519-16-3 (ISBN)
Public defence
2008-03-03, Hörsal 2, Ekonomikum, Kyrkogårdsgatan 10 B, Uppsala, 13:15
Opponent
Supervisors
Available from: 2008-02-21 Created: 2008-02-21Bibliographically approved

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