Housing wealth,liquidity constraints and self-employment |
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| Authors: | Richard Disney John Gathergood |
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| Institution: | 1. Economics Department, University of Warwick, Coventry CV4 7AL, United Kingdom;2. DG Economics Statistics and Research, Banca d’Italia, Via Nazionale 91, Roma 00184, Italy;1. Department of Economics, Ohio State University, United States;2. Federal Deposit Insurance Corporation, United States;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu 611130, China;2. Department of Economics, Clark University, 950 Main Street, Worcester, MA 01610, USA;3. Department of Economics, Clark University and IZA, Germany, 950 Main Street, Worcester, MA 01610,\nUSA |
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| Abstract: | This paper investigates the existence of liquidity constraints facing entrepreneurs in the United Kingdom. Using a household-level panel data set, entry to self-employment is shown to be a function of household net worth. We use inheritances and unanticipated movements in house prices as instruments for shocks to liquidity. Results indicate that inheritances are a poor instrument for liquidity constraints because both past and future inheritances predict entry to self-employment. House prices shocks are a more plausible instrument because self-employed households disproportionately re-mortgage, but our results again indicate little evidence of house price shocks unbinding liquidity constraints facing the would-be self-employed. |
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