Housing wealth, liquidity constraints and self-employment

Publication type

Journal Article

Authors

Publication date

June 1, 2009

Abstract:

This paper investigates the existence of liquidity constraints facing entrepreneurs in the United Kingdom. Using a household-level panel data set, entry to self-employment is shown to be a function of household net worth. We use inheritances and unanticipated movements in house prices as instruments for shocks to liquidity. Results indicate that inheritances are a poor instrument for liquidity constraints because both past and future inheritances predict entry to self-employment. House prices shocks are a more plausible instrument because self-employed households disproportionately re-mortgage, but our results again indicate little evidence of house price shocks unbinding liquidity constraints facing the would-be self-employed.

Published in

Labour Economics

Volume

Volume: 16 (1):79-88

DOI

http://dx.doi.org/10.1016/j.labeco.2008.05.002

Subjects

Notes

Previously 'In press, corrected proof' 29 May 2008

Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

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