Which Entrepreneurs are Financially Constrained?

44 Pages Posted: 10 Apr 2020 Last revised: 19 Feb 2021

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Marta C Lopes

IZA Institute of Labor Economics; Nova School of Business and Economics; Universidad Carlos III de Madrid

Francisco Queiro

Nova School of Business and Economics

Hugo Reis

Banco de Portugal

Date Written: November 18, 2019

Abstract

We study what type of entrepreneurs are affected by financial constraints by exploiting age-based discontinuities in the amount of funding available through a public program for unemployed workers. Our sample links administrative data on 2.1 million eligible workers to the firms they create, spanning a wide range of skills, sectors and outcomes. We find that access to funding increases the rate of entrepreneurship and that the effect is stronger for entrepreneurs who incorporate their business, especially for those who were in the top decile of the wage distribution before unemployment. Among incorporated entrepreneurs, the effect is strongest in the information and communication sector, followed by manufacturing. In terms of ex-post outcomes, we find that the effect is more pronounced for businesses in the upper half of the size, growth and profitability distributions. Our findings suggest that financial constraints hamper growth-oriented entrepreneurship.

Keywords: Entrepreneurship, Unemployment insurance, Financial constraints, Incorporated firms

JEL Classification: G38, H74, J65, J68, L26

Suggested Citation

Ferreira, Miguel Almeida and Lopes, Marta C and Lopes, Marta C and Queiro, Francisco and Reis, Hugo, Which Entrepreneurs are Financially Constrained? (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3543021 or http://dx.doi.org/10.2139/ssrn.3543021

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Marta C Lopes

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

HOME PAGE: http://www.novasbe.unl.pt/en/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://https://www.iza.org/person/28113/marta-c-lopes

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

HOME PAGE: http://economia.uc3m.es/personal/lopes/

Francisco Queiro

Nova School of Business and Economics ( email )

Lisbon, 1099-085
Portugal

Hugo Reis

Banco de Portugal ( email )

148, Rua do Comercio
Lisbon, P - 1101
Portugal

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