Household inequality, entrepreneurial dynamism, and corporate financing

Fabio Braggion, M.S.D. Dwarkasing, S.R.G. Ongena

Research output: Contribution to journalArticleScientificpeer-review


Economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism. To empirically investigate its impact, we construct local measures of household wealth inequality based on financial rents, home equity, and 1880 farmland. We identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 Homestead Act or US states’ removal of “death taxes”. Wealth inequality decreases firm entry and exit, and the proportion of high-tech businesses across metropolitan statistical areas. There is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary. Income per capita consequently grows more slowly.
Original languageEnglish
Pages (from-to)2448-2507
JournalThe Review of Financial Studies
Issue number5
Early online dateAug 2020
Publication statusPublished - May 2021


  • wealth inequality
  • entrepreneurship
  • homestead Act
  • EIG taxes


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