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Entrepreneurship, windfall gains and financial constraints: evidence from Germany.

Schäfer, Dorothea; Talavera, Oleksandr; Weir, Charlie

Authors

Dorothea Schäfer

Oleksandr Talavera

Charlie Weir

Abstract

We investigate the link between the propensity to become an entrepreneur and the exogenous release from financial constraints in Germany. This is defined in terms of the movement from employment to self-employment on receipt of a financial windfall. A theoretical framework developing Evans and Jovanovic (1989) is set up and tested with panel data from German households. The results show that financial constraints do exist given that individuals are more likely to start a personal business after receiving a windfall gain. The value of windfall gains has a significant but non linear effect on the decision to become self employed. The data reveal that differences in ability and income affect the change in employment status. We also report that there is no evidence that becoming self-employed involves the anticipation of windfall gains.

Journal Article Type Article
Publication Date Sep 1, 2011
Journal Economic modelling
Print ISSN 0264-9993
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 28
Issue 5
Pages 2174-2180
Institution Citation SCHAFER, D., TALAVERA, O. and WEIR, C. 2011. Entrepreneurship, windfall gains and financial constraints: evidence from Germany. Economic modelling [online], 28(5), pages 2174-2180. Available from: https://doi.org/10.1016/j.econmod.2011.05.010
DOI https://doi.org/10.1016/j.econmod.2011.05.010
Keywords Entrepreneurship; Windfall gains; Financial constraints

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