Household Inequality, Entrepreneurial Dynamism, and Corporate Financing

Fabio Braggion*, Mintra Dwarkasing, Steven Ongena

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)
26 Downloads (Pure)

Abstract

Economic theories posit conflicting hypotheses on how wealth inequality affects entrepre-neurial dynamism. We investigate the impact of wealth inequality on business dynamics by constructing local measures of household wealth inequality based on financial rents, home equity, and 1880 farmland. We then identify the effect of wealth inequality on entrepre-neurship by instrumenting it with land distribution under the 1862 Homestead Act. Wealth inequality decreases firm entry and exit, and the proportion of high-tech businesses across metropolitan statistical areas. Wealth inequality also lowers the supply of public goods, such as education. Growth in income per capita consequently lags.

Original languageEnglish
Pages (from-to)2448-2507
Number of pages60
JournalReview of Financial Studies
Volume34
Issue number5
DOIs
Publication statusPublished - 1 May 2021

Bibliographical note

Publisher Copyright:
© 2020 The Authors 2020. Published by Oxford University Press.

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