Entrepreneurship, Windfall Gains and Financial Constraints: The Case of Germany

25 Pages Posted: 2 Mar 2005

See all articles by Oleksandr Talavera

Oleksandr Talavera

Swansea University - School of Management

Dorothea Schaefer

German Institute for Economic Research (DIW Berlin); JIBS

Date Written: February 28, 2005

Abstract

In this paper, we investigate the link between entrepreneurship and financial constraints. We develop a dynamic partial equilibrium model of an individual utility maximization that predicts that the person is more likely to start her business when financial constraints are eased. We test this hypothesis using German Socio-Economic Panel data covering the periods 2000-2002 and measure release from financial constraints by windfall gains. The estimates confirm that the individual has higher propensity to start her business when she gets windfall gains. Furthermore, there are stronger effects for persons that have sufficient, but not very high levels of income and abilities.

Keywords: Entrepreneurship, windfall gains, financial

JEL Classification: G3

Suggested Citation

Talavera, Oleksandr and Schaefer, Dorothea, Entrepreneurship, Windfall Gains and Financial Constraints: The Case of Germany (February 28, 2005). Available at SSRN: https://ssrn.com/abstract=669003 or http://dx.doi.org/10.2139/ssrn.669003

Oleksandr Talavera

Swansea University - School of Management ( email )

Haldane Building
Singleton Park
Swansea, SA2 8PP
United Kingdom

Dorothea Schaefer (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany
+49 30 8978 9162 (Phone)
+49 30 8978 9104 (Fax)

JIBS ( email )

Jönköping, 55111
Sweden

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