The Impact of Consumer Credit Access on Self-Employment and Entrepreneurship

93 Pages Posted: 7 Jan 2019 Last revised: 19 Feb 2021

See all articles by Kyle Herkenhoff

Kyle Herkenhoff

University of Minnesota - Minneapolis

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Ethan Cohen-Cole

Econ One Research

Date Written: July 23, 2020

Abstract

We examine how consumer credit access impacts self-employment and small business ownership by building a new dataset that links 3 million individual earnings and credit reports to pass-through tax records. We show that self-employment and employer business ownership increase with personal credit access. We isolate the causal impact of credit on both types of business owners by exploiting bankruptcy flag removals. Following flag removal, self-employed individuals earn and borrow more, and are also more likely to enter capital-intensive industries. Individuals are also more likely to own an employer business and borrow on average 33% ($40k) more after flag removal.

Keywords: Consumer Credit, Entrepreneurship, Small Firm Ownership, Personal Bankruptcy

JEL Classification: M13, D13, G32, G33

Suggested Citation

Herkenhoff, Kyle and Phillips, Gordon M. and Cohen-Cole, Ethan, The Impact of Consumer Credit Access on Self-Employment and Entrepreneurship (July 23, 2020). Tuck School of Business Working Paper No. 3305920, Available at SSRN: https://ssrn.com/abstract=3305920 or http://dx.doi.org/10.2139/ssrn.3305920

Kyle Herkenhoff

University of Minnesota - Minneapolis ( email )

110 Wulling Hall, 86 Pleasant St, S.E.
308 Harvard Street SE
Minneapolis, MN 55455
United States

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ethan Cohen-Cole

Econ One Research ( email )

United States

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