Working Paper: NBER ID: w27452
Authors: Aymeric Bellon; J. Anthony Cookson; Erik P. Gilje; Rawley Z. Heimer
Abstract: We examine how wealth windfalls affect self-employment decisions using data on cash payments from claims on Texas shale drilling to people throughout the United States. Individuals who receive large wealth shocks (greater than $50,000) have 51% higher self-employment rates. The increase in self-employment rates is driven by individuals who lengthen existing self-employment spells, and not by individuals who leave regular employment for self-employment. Moreover, the effect of wealth reverts for individuals whose payments run out. Rather than alleviating a financial constraint, our evidence suggests that unrestricted cash windfalls affect self-employment decisions primarily through self-employment’s non-pecuniary benefits.
Keywords: self-employment; wealth windfalls; shale drilling; cash payments
JEL Codes: G02; G5; G51; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large wealth shocks (greater than $50,000) (G51) | self-employment rates (J23) |
| self-employment rates (J23) | exit from self-employment (J26) |
| wealth windfalls (D33) | extending existing self-employment spells (J23) |
| wealth windfalls (D33) | nonpecuniary benefits of self-employment (J32) |
| wealth windfalls (D33) | no increased transitions into self-employment from regular employment (J62) |