Liquidity, Risk, and Occupational Choices
Copyright policy )Liquidity, Risk, and Occupational Choices
We explore which financial constraints matter the most in the choice of becoming an entrepreneur. We consider a randomly assigned welfare program in rural Mexico and show that cash transfers signi cantly increase entry into entrepreneurship. We then exploit the cross-household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received. Guided by a simple occupational choice model, we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints.
JEL: O - Economic Development, and Behavior/L.L2.L26 - Entrepreneurship, L.L2.L26, 330, entrepreneurship, Innovation, B- ECONOMIE ET FINANCE, insurance; entrepreneurship; Financial constraints; liquidity;, liquidity, JEL: L - Industrial Organization/L.L2 - Firm Objectives, Technological Change, Financial constraints, and Growth/O.O1 - Economic Development/O.O1.O16 - Financial Markets • Saving and Capital Investment • Corporate Finance and Governance, JEL: G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G20 - General, 658.1, G.G2.G20, Organisation et finances d'entreprise, O.O1.O16, financial constraints,entrepreneurship,insurance,liquidity, [SHS.GESTION]Humanities and Social Sciences/Business administration, [SHS.GESTION] Humanities and Social Sciences/Business administration, Organization, insurance, jel: jel:G20, jel: jel:L26, jel: jel:O16
JEL: O - Economic Development, and Behavior/L.L2.L26 - Entrepreneurship, L.L2.L26, 330, entrepreneurship, Innovation, B- ECONOMIE ET FINANCE, insurance; entrepreneurship; Financial constraints; liquidity;, liquidity, JEL: L - Industrial Organization/L.L2 - Firm Objectives, Technological Change, Financial constraints, and Growth/O.O1 - Economic Development/O.O1.O16 - Financial Markets • Saving and Capital Investment • Corporate Finance and Governance, JEL: G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G20 - General, 658.1, G.G2.G20, Organisation et finances d'entreprise, O.O1.O16, financial constraints,entrepreneurship,insurance,liquidity, [SHS.GESTION]Humanities and Social Sciences/Business administration, [SHS.GESTION] Humanities and Social Sciences/Business administration, Organization, insurance, jel: jel:G20, jel: jel:L26, jel: jel:O16
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