Personal Wealth and Self-Employment
64 Pages Posted: 2 Apr 2020
Date Written: February 29, 2020
We examine how wealth windfalls affect self-employment decisions using data on cash payments from claims on Texas shale drilling to people throughout the United States. Individuals who receive large wealth shocks (greater than $50,000) have 51% higher self-employment rates. The increase in self-employment rates is driven by individuals who lengthen existing self- employment spells, and not by individuals who leave regular employment for self-employment. Moreover, the effect of wealth reverts for individuals whose payments run out. Rather than alleviating a financial constraint, our evidence suggests that unrestricted cash windfalls affect self-employment decisions primarily through self-employment’s non-pecuniary benefits.
Keywords: self-employment; entrepreneurship; personal wealth; oil and gas; mineral rights
JEL Classification: L26, G51, G39
Suggested Citation: Suggested Citation