Household wealth inequality, entrepreneurs' financial constraints, and the great recession: Evidence from the Kauffman Firm Survey

Fabio Braggion*, Mintra Dwarkasing, Steven Ongena

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

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.

Original languageEnglish
Pages (from-to)533-543
JournalSmall Business Economics: An International Journal
Volume50
Issue number3
DOIs
Publication statusPublished - Mar 2018

Keywords

  • Wealth inequality
  • Entrepreneurship
  • Financial constraints
  • UNITED-STATES
  • CREDIT
  • GROWTH

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