Finance
Research insight
INVITED EDITOR
Editorial from
Nova SBE Finance Knowledge Center
Nova SBE Finance Knowledge Center is to developed and disseminate state-of-the-art research and knowledge in finance.
July 16, 2024
8. Decent work and economic growth

8. Decent work and economic growth

Promote inclusive and sustainable economic growth, full and productive employment and decent work for all
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Which Entrepreneurs are Financially Constrainted?

The study from Nova SBE Finance Knowledge Center investigates the financial constraints faced by different types of entrepreneurs.

This study investigates what type of entrepreneurs are affected by financial constraints by exploiting age-based discontinuities in the amount of funding available through a public program for unemployed workers. Our sample links administrative data on 2.1 million eligible workers to the firms they create, spanning a wide range of skills, sectors and outcomes. We find that access to funding increases the rate of entrepreneurship and that the effect is stronger for entrepreneurs who incorporate their business, especially for those who were in the top decile of the wage distribution before unemployment. Among incorporated entrepreneurs, the effect is strongest in the information and communication sector, followed by manufacturing. In terms of ex-post outcomes, we find that the effect is more pronounced for businesses in the upper half of the size, growth and profitability distributions. Our findings suggest that financial constraints hamper growth-oriented entrepreneurship.

Researchers: Miguel Ferreira (Nova SBE), Marta Lopes (Nova SBE), Francisco Queiro (Nova SBE), Hugo Reis (Banco de Portugal).

To access the paper, click here.

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