Liquidity Constraints, Cash Windfalls, and Entrepreneurship: Evidence from Administrative Data on Lottery Winners
Year: 2023
Type: preprint
Abstract: This paper examines the causal effect of financial resources on entrepreneurial decisions by exploiting wealth shocks from lottery winnings. Using administrative panel data that link lottery winners to business registration records in Taiwan, we employ a triple-differences design that leverages variation in prize size and compares current versus future lottery winners. The results show that receiving a large lottery prize exceeding 1.5 million NT$ (approximately 50,000 US$) increases the number of businesses owned by 0.025 (a 12.3% increase relative to the baseline mean), with effects that persist over at least five years. For individuals without prior business ownership, large windfalls raise the probability of entrepreneurial entry by 1.5 percentage points. This entry response is driven by individuals with high pre-winning earnings but no liquid savings and is concentrated in incorporated rather than unincorporated ventures. For existing business owners, large windfalls increase incorporated business holdings by 10.7%, but do not significantly affect the continuation of businesses owned before winning.
Language: English
Subfield: Management of Technology and Innovation
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4361865610