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Household wealth inequality, entrepreneurs’ financial constraints and the Great Recession: Evidence from the Kauffman Firm Survey


Braggion, Fabio; Dwarkasing, Mintra; Ongena, Steven (2018). Household wealth inequality, entrepreneurs’ financial constraints and the Great Recession: Evidence from the Kauffman Firm Survey. Small Business Economics, 50(3):533-543.

Abstract

We empirically test if household wealth inequality affects borrowing constraints of young entrepreneurs. We construct a measure of wealth inequality at the US county level based on the distribution of financial rents in 2004. We find that in more unequal areas, entrepreneurs are less likely to apply for a loan fearing that their applications will be turned down and they use more of their own funds to finance their ventures. In more unequal areas, the number of bank establishments per capita is lower, this effect being stronger during the 2007–2008 financial crisis.

Abstract

We empirically test if household wealth inequality affects borrowing constraints of young entrepreneurs. We construct a measure of wealth inequality at the US county level based on the distribution of financial rents in 2004. We find that in more unequal areas, entrepreneurs are less likely to apply for a loan fearing that their applications will be turned down and they use more of their own funds to finance their ventures. In more unequal areas, the number of bank establishments per capita is lower, this effect being stronger during the 2007–2008 financial crisis.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 March 2018
Deposited On:12 Sep 2018 14:17
Last Modified:24 Sep 2019 23:36
Publisher:Springer
ISSN:0921-898X
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1007/s11187-017-9906-2
Other Identification Number:merlin-id:14341

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