Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence
European Banking Center Discussion Paper Series No. 2014-008
CentER Discussion Paper Series No. 2014-050
49 Pages Posted: 2 Sep 2014
Date Written: September 1, 2014
We use a novel enterprise survey from Tanzania to gauge the relationship between saving instruments and entrepreneurial reinvestment. While most informal savings practices do not imply a lower likelihood of entrepreneurial reinvestment when compared with formal savings practices, we find a significantly negative effect of saving within the household on the likelihood of reinvesting entrepreneurial profits. Our results are robust to an extensive list of robustness checks, including controlling for reverse causation and omitted variable biases. Our work contributes to the recent debate on the implications of different saving instruments in developing countries and expands the entrepreneurial financing constraints literature by focusing on internal rather than external fundings constraints.
Keywords: Entrepreneurial finance; savings; reinvestment; financial inclusion.
JEL Classification: D14, G21, O12, O16
Suggested Citation: Suggested Citation