Abstract

This dissertation lays out new evidence on the relationship between inheritances and entrepreneurship and the dynamics of business formation. While the existing literature is split on whether liquidity constraints pose a real threat to the formation of new businesses, this study contributes to the debate by addressing the endogeneity problem between inherited wealth and entrepreneurship. The main results lend support to the liquidity constraint theory, indicating that receiving an inheritance boosts the likelihood of owning a business by about 3% for the average individual, which translates to a 21% increase in the probability of entrepreneurship over the baseline. Chapter 1 presents a dynamic model of intergenerational transmission of wealth and occupational choice in which bequests act as a means of startup financing for nascent entrepreneurs. Chapter 2 introduces the empirical relevance of inheritances in the decision to start a business using data from the Panel Study of Income Dynamics (PSID), discusses the challenges faced by the existing literature, and elucidates the contributions the current study brings to the field in its empirical strategy. Chapter 3 illustrates the results of the empirical analysis and provides a discussion and conclusion.

Committee Chair

Costas Azariadis, Yannis Ioannides

Committee Members

Gaetano Antinolfi, Ana Babus, Bruce Petersen,

Degree

Doctor of Philosophy (PhD)

Author's Department

Economics

Author's School

Graduate School of Arts and Sciences

Document Type

Dissertation

Date of Award

Spring 5-15-2023

Language

English (en)

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Economics Commons

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