Liquidity, Risk, and Occupational Choices
Bianchi, Milo; Bobba, Matteo (2013), Liquidity, Risk, and Occupational Choices, The Review of Economic Studies, 80, 2, p. 491-511. 10.1093/restud/rds031
TypeArticle accepté pour publication ou publié
Journal nameThe Review of Economic Studies
Oliver and Boyd
MetadataShow full item record
Dauphine Recherches en Management [DRM]
Paris-Jourdan Sciences Economiques [PSE]
Abstract (EN)We explore which financial constraints matter the most in the choice of becomingan entrepreneur. We consider a randomly assigned welfare program in rural Mexicoand show that cash transfers signi cantly increase entry into entrepreneurship. Wethen exploit the cross-household variation in the timing of these transfers and ndthat current occupational choices are signi cantly more responsive to the transfersexpected for the future than to those currently received. Guided by a simple occu-pational choice model, we argue that the program has promoted entrepreneurshipby enhancing the willingness to bear risk as opposed to simply relaxing currentliquidity constraints.
Subjects / Keywordsentrepreneurship; liquidity; insurance; Financial constraints
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