Entrepreneurial financing, savings, and mobility

Abstract

Due to conflicts of interest between the agent that controls the funds of the firm (the entrepreneur) and the agent that provides the funds (the investor), external financing is limited. The limited availability of external financing creates an incentive for entrepreneurs to increase the internal funds with higher savings. Using data from the Panel Study of Income Dynamics, this chapter shows that entrepreneurs have higher saving rates than workers and experience greater upward mobility. Given these results, policies promoting entrepreneurship — especially those providing financial resources to households located at the lower end of the distribution of wealth — are important for fostering socio-economic mobility.

Citation

Quadrini, V. (2001), "Entrepreneurial financing, savings, and mobility", Libecap, G.D. (Ed.) Entrepreneurial inputs and outcomes: New studies of entrepreneurship in the United States (Advances in the Study of Entrepreneurship, Innovation and Economic Growth, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 71-94. https://doi.org/10.1016/S1048-4736(01)13005-5