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Occupational choice and liquidity constraints

Author

Listed:
  • Thierry Magnac

    (LEA - Laboratoire d'Economie Appliquée - INRA - Institut National de la Recherche Agronomique)

  • Jean-Marc Robin

    (LEA - Laboratoire d'Economie Appliquée - INRA - Institut National de la Recherche Agronomique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

Using U.S. data, Evans and Jovanovic find a strong effect of the level of assets on the probability of being self-employed. They interpret this result as evidence of liquidity constraints. In this paper, we follow up this line of research: first, by replicating Evans and Jovanovic's methodology on French data to show that the empirical evidence is similar. Second, we embed their static model into a dynamic framework with uncertainty. The main theoretical prediction that can be drawn is that if the liquidity constraint is strong enough a future increase in the "entrepreneurial ability" of an agent, although raising expected future incomes, may induce her to lower her current consumption and raise her savings.

Suggested Citation

  • Thierry Magnac & Jean-Marc Robin, 1996. "Occupational choice and liquidity constraints," Post-Print hal-00359422, HAL.
    • Handle: RePEc:hal:journl:hal-00359422
    DOI: 10.1006/reco.1996.0008
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    Citations

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    Cited by:

    1. Nathalie Colombier & David Masclet, 2007. "L'importance de l'environnement familial comme déterminant du travail indépendant," Économie et Statistique, Programme National Persée, vol. 405(1), pages 99-118.
    2. Anna L. Paulson & Robert M. Townsend, 2003. "Distinguishing limited commitment from moral hazard in models of growth with inequality," Working Paper Series WP-03-06, Federal Reserve Bank of Chicago.
    3. Céline Bessière & Caroline De Paoli & Muriel Roger & Bénédicte Gouraud, 2011. "Les agriculteurs et leur patrimoine : des indépendants comme les autres ?," Économie et Statistique, Programme National Persée, vol. 444(1), pages 55-74.
    4. Ravallion, Martin & Mesnard, Alice, 2001. "Wealth Distribution and Self-Employment in a Developing Economy," CEPR Discussion Papers 3026, C.E.P.R. Discussion Papers.
    5. Alice Mesnard & Martin Ravallion, 2006. "The Wealth Effect on New Business Startups in a Developing Economy," Economica, London School of Economics and Political Science, vol. 73(291), pages 367-392, August.
    6. Gabriel Madeira, 2014. "Legal enforcement, default and heterogeneity of project-financing contracts," Annals of Finance, Springer, vol. 10(4), pages 569-602, November.
    7. Shashwati Banerjee & Kishor Goswami, 2020. "Self-employed or Paid Employed: Who can Earn more among the Slum Dwellers and Why?," Progress in Development Studies, , vol. 20(1), pages 7-25, January.
    8. Anne Laferrère, 1998. "Devenir travailleur indépendant," Économie et Statistique, Programme National Persée, vol. 319(1), pages 13-28.
    9. Alice Mesnard, 2004. "Temporary migration and capital market imperfections," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 242-262, April.
    10. Falco, Paolo & Haywood, Luke, 2016. "Entrepreneurship versus joblessness: Explaining the rise in self-employment," Journal of Development Economics, Elsevier, vol. 118(C), pages 245-265.
    11. repec:dau:papers:123456789/11698 is not listed on IDEAS
    12. Mesnard, Alice & Ravallion, Martin, 2001. "Is inequality bad for business : a non-linear microeconomic model of wealth effects on self-employment," Policy Research Working Paper Series 2527, The World Bank.
    13. Henning Lohmann & Silvia Luber & Walter Müller, 1999. "Who is Self-Employed in France, the United Kingdom and West Germany? Patterns of Male Non-Agricultural Self-Employment," MZES Working Papers 11, MZES.
    14. Sibylle Gollac, 2008. "Travail indépendant et transmissions patrimoniales : le poids des inégalités au sein des fratries," Économie et Statistique, Programme National Persée, vol. 417(1), pages 55-75.

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