Premium
The Wealth Effect on New Business Startups in a Developing Economy
Author(s) -
MESNARD ALICE,
RAVALLION MARTIN
Publication year - 2006
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2006.00515.x
Subject(s) - economics , market liquidity , wealth elasticity of demand , nonparametric statistics , wealth effect , inequality , concave function , monetary economics , stock (firearms) , aggregate (composite) , function (biology) , national wealth , econometrics , labour economics , regular polygon , finance , mathematics , composite material , biology , engineering , mechanical engineering , monetary policy , mathematical analysis , materials science , geometry , evolutionary biology
The paper tests for nonlinearities in the wealth effect on self‐employment, as can arise from startup costs or liquidity constraints. Using both nonparametric and parametric methods, we show that the relationship between the probability of a return migrant to Tunisia starting up a business and the stock of his savings repatriated at return is concave for almost the entire range of our data, though we find weak evidence of a convex relationship at very low wealth levels. Our results suggest that the aggregate self‐employment rate is an increasing function of aggregate wealth, but a decreasing function of wealth inequality.