Small business survival and inheritance: evidence from Germany |
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Authors: | Dorothea Schäfer Oleksandr Talavera |
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Affiliation: | (1) DIW Berlin, German Institute for Economic Research, Mohrenstrasse 58, Berlin, 10117, Germany |
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Abstract: | This paper investigates whether small businesses face financial constraints that affect their survival. A model of moral hazard is developed in which financial constraints arise endogenously. The model predicts that higher private assets relax financial constraints and have a positive effect on the firm’s probability of survival. The empirical analysis confirms that the entrepreneur has a higher propensity to stay in business when she inherits capital. This effect is particularly strong for entrepreneurs who switch from self-employment into wage employment. |
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Keywords: | Entrepreneurship Survival Financial constraints |
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