Knockin’ on the Bank’s Door: Why is Self-Employment Going Down?

44 Pages Posted: 17 Nov 2020

See all articles by Alina Malkova

Alina Malkova

Florida Institute of Technology

Date Written: May 30, 2020


This study analyzes a decline in the ability to obtain financing as a potential explanation for the observed decrease in the U.S. self-employment. The shrinking of the U.S. bank branch network since 2010 and the increased average borrower-lender distance reduce the accessibility of credit institutions for borrowers. To evaluate the impact of the CMA on entry into self-employment, I disaggregate the self-employed into two categories: entrepreneurs whose businesses depend on business loans (incorporated self-employed) and other self-employed (unincorporated self-employed). Using a novel data source (the Community Advantage Panel Survey database), I find that the proximity of credit market institutions has heterogeneous effects on the transition to self-employment. An improvement in the CMA increases the likelihood of transition to incorporated self-employment. But for the unincorporated self-employed, the effect is the opposite: the probability of transition to unincorporated self-employment decreases, and workers of this type are more likely to switch to paid employment to be able to receive non-business related loans. The paper discusses the implications of these results for different policies.

Keywords: Self-employment, Access to Credit Market, Labor Mobility

JEL Classification: G21, G51, J62, L84, R12, R32

Suggested Citation

Malkova, Alina, Knockin’ on the Bank’s Door: Why is Self-Employment Going Down? (May 30, 2020). Available at SSRN: or

Alina Malkova (Contact Author)

Florida Institute of Technology ( email )

150 West University Blvd.
Melbourne, FL 32901-6975
United States

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