Study on Inheritance and Transitions to Self-Employment (Holtz-Eakin, Joulfaian, & Rosen, 1994)
A 1994 study by Douglas Holtz-Eakin, David Joulfaian, and Harvey S. Rosen, titled 'Sticking it out: Entrepreneurial survival and liquidity constraints' and published in the Journal of Political Economy, found that receiving an inheritance increased an individual's likelihood of starting a business. The research also showed that self-employed individuals who received an inheritance tended to expand their business operations. These findings suggest that liquidity constraints are a significant barrier to entrepreneurial activities.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
Related
British Study on Inheritance and Entrepreneurship (Blanchflower & Oswald, 1998)
Study on Inheritance and Transitions to Self-Employment (Holtz-Eakin, Joulfaian, & Rosen, 1994)
An economist observes that individuals who receive a sudden, unexpected financial windfall are significantly more likely to start their own business within the following year compared to a demographically similar group of individuals who did not receive such a windfall. What is the most robust economic conclusion that can be drawn from this observation?
Evaluating a Research Design for Financial Constraints
Critiquing the Inheritance-as-Experiment Model
The Logic of Using Inheritance as a Research Tool
The primary reason that receiving an unexpected inheritance is a useful natural experiment for studying credit constraints is that the amount of the inheritance is typically large enough to fund a new business.
Match each component of a study using inheritance to understand financial constraints with its corresponding role or interpretation in the research design.
When economists use the receipt of an unexpected inheritance as a natural experiment, they are typically investigating the impact of __________ on individual economic behavior, such as entrepreneurship.
Analyzing a Flawed Research Design
Interpreting Scenarios of Financial Windfalls
A researcher is using the receipt of an unexpected inheritance as a natural experiment to test the hypothesis that some potential entrepreneurs are credit-constrained. Arrange the following statements into the correct logical sequence that outlines the research process and its conclusion.
Learn After
A landmark economic study observed that individuals who receive a sizable inheritance are significantly more likely to start their own business than those who do not. Similarly, existing business owners who receive an inheritance tend to invest more in their companies. Which of the following economic barriers to entrepreneurship is best illustrated by these findings?
Evaluating a Policy to Promote Entrepreneurship
Analyzing the Link Between Capital and Entrepreneurship
A 1994 study found that individuals who receive an inheritance are more likely to start a business. This finding demonstrates that people who come from families that can provide an inheritance inherently possess stronger entrepreneurial abilities.
Interpreting Economic Research Design
A well-known 1994 study concluded that access to capital is a significant barrier to starting a business, based on the finding that individuals are more likely to become entrepreneurs after receiving an inheritance. This conclusion rests on the assumption that inheritance acts primarily as an external infusion of funds. Which of the following scenarios, if true, would most seriously weaken the validity of this conclusion?
Predicting Entrepreneurial Outcomes
The 1994 study by Holtz-Eakin, Joulfaian, and Rosen, which found that receiving an inheritance increases the likelihood of starting a business, provides strong evidence that ______ are a significant barrier to entrepreneurship.
The 1994 study by Holtz-Eakin, Joulfaian, and Rosen concluded that the primary reason inheritance leads to more business creation is that it reduces an individual's fear of failure (risk aversion), making them more willing to take on entrepreneurial ventures.