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on Entrepreneurship |
|
Issue of 2005‒06‒14
twenty-two papers chosen by Marcus Dejardin Facultés Universitaires Notre-Dame de la Paix |
| By: | Veronique Schutjens; Erik Stam |
| Abstract: | This article describes the benefits and pitfalls of starting a firm with an entrepreneurial team, drawing on a longitudinal empirical analysis of the life course of 90 team start-ups and 1196 solo start-ups in the Netherlands. In the first three years of their existence, team start-ups perform better than solo start-ups on several success indicators. However, after this start phase, entrepreneurial teams face particular problems in realizing further growth. These team-specific bottlenecks can even threaten firm survival. In later life course phases we found a clear distinction between entrepreneurial teams with stagnating growth and teams that succeeded in solving these problems and went on to realize further growth. |
| Keywords: | entrepreneurial teams, start-ups, firm growth, life course analysis |
| JEL: | D21 D23 D74 D92 L25 M13 M54 |
| URL: | http://d.repec.org/n?u=RePEc:esi:egpdis:2005-17&r=ent |
| By: | Hvide, Hans K |
| Abstract: | Founders of new firms tend to be experienced workers pursuing opportunities related to their previous employment. The paper proposes a simple framework to study the interaction between individual workers’ entrepreneurship decision and established firms’ effort to keep their best workers and ideas. The main insights are twofold. First, taking the firm size as given, larger firms tend to have less fine-tuned wage setting and produce entrepreneurs of higher quality than smaller firms. Second, making firm size endogenous, stronger property rights protection makes the optimal firm size larger (and the average quality of entrepreneurs higher). I apply these ideas to entrepreneurs’ data from a Stanford MBA alumni survey and firm size data from the US software industry. |
| Keywords: | entrepreneurship; IPP; patents; private benefits; property rights; software; spin off; start up |
| JEL: | G39 J33 J41 J62 K00 L24 L25 M52 M54 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4979&r=ent |
| By: | Gavin C. Reid; Julia A. Smith |
| Abstract: | This paper presents new empirical evidence, obtained by fieldwork methods, on investor risk-handling practice in the UK venture capital industry. Its focus is on high-technology firms and the techniques their venture capital backers use for risk management. The active areas of risk management are explored under the headings of risk premia, investment time horizons, and sensitivity analysis. As an organising framework, risk is divided into ‘agency risk’, ‘business risk’ and ‘innovation risk’. Data were gathered by working through a semi-structured interview agenda in face-to-face meetings with the top venture capital deal-makers in the UK. They were questioned specifically on how they handled risks in high-technology ventures. The interview agenda covered: risk premia, investment time horizon, sensitivity analysis, expected values, cash flow prediction, financial objectives, decision making, and qualitative appraisal. The paper draws on evidence from all eight agenda items, but focuses on the first three. This paper finds that the three categories of risk identified as important, innovation, agency and business risk, have pervasive influences on investor conduct in the UK. Their form of influence was traced under the agenda headings of risk premia, investment time horizon, and sensitivity analysis. It was found that the riskiness of investment types (e.g. seed, MBO etc) could be clearly ranked by investors. These rankings were found to be generally consistent with principles of financial economics. Investors were also asked what factors were most important to their risk appraisals, for given high technology investments. Of a wide range of factors, it was found that the most important to risk appraisal could be directly related to our categories of ‘agency risk’ and ‘business risk’. It was found too that the time profiles of investments and their sensitivity to changed assumptions could be approached using our three risk categories. Of these, ‘innovation risk’ was thought to be particularly high, implying various forms of adaptation by investors, including setting very high hurdle rates of return and deploying radical stress tests of investment models. |
| Keywords: | Venture Capital, Risk Management, High-Technology, Fieldwork |
| JEL: | G24 D81 L84 M21 L21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0107&r=ent |
| By: | Gavin C. Reid; Julia A. Smith |
| Abstract: | This paper examines, in a high technology context, how investor and investee behave, and interact, in the face of risk. The evidence on which it is based was obtained by fieldwork methods, over the period 2000-2, examining a sample of UK investors and investees active in high technology areas. The paper focuses on four questions: how risky are investments; what affects risk most; what aspects of innovation affect risk; what non-financial factors affect risk most? It finds that there was general agreement between investors and investees about which investments were relatively more or less risky. However, investees were shown to be relatively more risk averse than investors, right across the spectrum of investee types. When it came to factors affecting risk most, there was a clear difference between investors and investees. Agency risk was largely the concern of the investor. Business risk was the investee’s first priority, and agency risk did not figure large in the investee’s mind. This suggests that this component of risk had successfully been shifted on to the investor. Business risk was also a clear concern of investors, but they placed more emphasis on matters like market opportunities and sales, than did investees. The paper concludes that investors and investees generally see risk in the same light, but, that when views differ, this is explicable either by function (producer/ funder) or by relative risk aversion. |
| Keywords: | Venture Capital, Risk Management, High-Technology, Fieldwork |
| JEL: | G24 D81 L84 M21 L21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0205&r=ent |
| By: | Audretsch, David B; Carree, Martin A; Thurik, A R Roy; van Stel, A J |
| Abstract: | This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemployment and self-employment, i.e. ‘refugee’ and ‘entrepreneurial’ effects. We also find that the ‘entrepreneurial’ effects are considerably stronger than the ‘refugee’ effects. |
| Keywords: | entreprenuership; Gibrat's Law |
| JEL: | L11 M13 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5057&r=ent |
| By: | Acs, Zoltán J; Audretsch, David B; Braunerhjelm, Pontus; Carlsson, Bo |
| Abstract: | The intellectual breakthrough contributed by the new growth theory was the recognition that investments in knowledge and human capital endogenously generate economic growth through the spillover of knowledge. Endogenous growth theory does not explain how or why spillovers occur. The missing link is the mechanism converting knowledge into economically relevant knowledge. This Paper develops a model that introduces a filter between knowledge and economic knowledge and identifies entrepreneurship as a mechanism that reduces the knowledge filter. A cross-country regression analysis over the period 1981-2001 provides empirical support for the model. We conclude that public policies facilitating knowledge spillovers through entrepreneurship may be an important new approach to promoting economic growth. |
| Keywords: | endogenous growth; entrepreneurship; innovation; knowledge |
| JEL: | L10 O10 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4783&r=ent |
| By: | Audretsch, David B; Keilbach, Max |
| Abstract: | Since the early 1980s, the role and general perception of entrepreneurship and start-up activities has changed drastically. In this paper, we investigate what determines regions’ entrepreneurial behaviour and the impact of it on regional economic performance. We argue that economic knowledge not only differs from traditional factors of production due to its public goods characteristic but it is also uncertain. With that perspective, the role of entrepreneurship is to take on the corresponding risk by starting up a new firm and thus to ‘test’ uncertain economic knowledge. This implies that knowledge spills over to the start-up firm and therefore entrepreneurship can be expected to have a positive impact on economic performance in a knowledge-based economy. We test this hypothesis using a production function approach. Using data on German regions, we estimate a two-equation system that regresses on both variables, entrepreneurship and economic performance, simultaneously, thus correcting for an endogeneity bias. We find a significant impact of entrepreneurship capital on economic output. On the other hand, spatially-specific entrepreneurship capital is shaped by regional-specific factors. However, the extent of this is different for knowledge based and non-knowledge based measures of entrepreneurship. We derive policy conclusions from our findings. |
| Keywords: | economic output; endogeneity bias; entrepreneurship; production function; three stage least squares |
| JEL: | M13 O32 O47 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4905&r=ent |
| By: | Audretsch, David B; Lehmann, Erik E |
| Abstract: | This study examines the impact locational spillovers have on firm performance. Based on a uniquely created dataset consisting of high-technology start-ups publicly listed in Germany, this paper tests the proposition of locational spillovers positively affecting firm performance, as measured by abnormally high profits on the stock market. The results provide evidence that geographic proximity and university spillovers are complementary determinants of firm performance. While neither geographic proximity nor academic research spillovers alone can explain firm performance, a combination of both factors results in significant higher stock market performance. The results also show academic spillovers are heterogeneous in their impact depending on the type. In particular, spillovers from social sciences have a different impact on firm performance than do spillovers from natural science. |
| Keywords: | firm performance; university spillover; university-firm collaboration |
| JEL: | L20 M13 R30 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4949&r=ent |
| By: | Degryse, Hans; Masschelein, Nancy; Mitchell, Janet |
| Abstract: | This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyse the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping bank credit. The Belgian financial environment reflects a number of interesting features: high banking sector concentration; ‘in-market’ mergers with large target banks; importance of large banks in providing external finance to SMEs; and low numbers of bank lending relationships maintained by SMEs. We find that bank mergers generate short-term and longer-term effects on borrowers' probability of losing a lending relationship and on credit availability. Mergers also have heterogeneous impacts across borrower types, including borrowers of acquiring and target banks, borrowers of differing size, borrowers with single versus multiple relationships, and borrowers with differing relationship intensities. Firms borrowing from acquiring banks are less likely to lose their lending relationship, while target bank borrowers are more likely to lose their relationship or see their credit availability harmed. Overlap borrowers – borrowing from two of the merging banks – are less likely to lose their relationship than firms borrowing from only one of the merging banks or firms borrowing from non-merging banks. |
| Keywords: | bank lending relationships; bank mergers; SME loans |
| JEL: | G21 G32 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5061&r=ent |
| By: | Bernadette Power; Gavin C. Reid |
| Abstract: | This paper focuses on a new concern in the small firm’s literature, namely what makes a small firm stay in business for a long time. It reflects a change in economic policy, away from an emphasis on volume of start-ups to an emphasis on quality of start-ups. The basic hypothesis is that flexibility enhances the long run prospects of the small firm. This is explored by examining precipitating causes of organisational change within the small firm, and the consequential adjustments. The study is fieldwork based and uses evidence from face-to-face interviews with 63 owner managers of mature small firms in Scotland. New measures of flexibility and turbulence are used to explain the performance of mature small firms. These depend on our unique body of evidence from interviews with owner managers. Performance is measured using a Likert scale over 28 distinct attributes. Econometric estimates are reported on the relationship between flexibility, turbulence and performance. This is done in two forms. The first involves generalised least squares estimatation (with heteroskedastic adjustment) of the relationship between turbulence, four measures of flexibility, and performance. The second involves Heckman sample selection estimation, of this performance relationship. It is found that turbulence has a negative effect on performance. Further, this impact is relatively large. Next in importance are those flexibility factors which can be categorised as precipitating causes of organisational change (as opposed to consequential adjustments) within the mature small firm. Finally, trade-off relationships are found to exist between two of the measures of flexibility (viz. agility and speed). We believe that this trade-off relationship is worthy of further empirical investigation |
| Keywords: | Flexibility, Turbulence, Performance, Small Firms |
| JEL: | C42 D21 G33 L2 M13 M21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0207&r=ent |
| By: | Fumagalli, Chiara; Motta, Massimo; Persson, Lars |
| Abstract: | We extend the literature on exclusive dealing by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive deals can be used to improve the incumbent’s bargaining position in the merger negotiation. Second, the incumbent finds it easier to elicit the buyer’s acceptance than in the case where entry can occur only by installing new capacity. Third, exclusive dealing reduces welfare because (i) it may trigger entry through merger whereas de novo entry would be socially optimal, and (ii) it may deter entry altogether. Finally, we show that when exclusive deals include a commitment on future prices they will increase welfare. |
| Keywords: | antitrust; entry deterrence; exclusive dealing; mergers |
| JEL: | K21 L10 L40 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4902&r=ent |
| By: | Bottazzi, Laura; Da Rin, Marco; Hellmann, Thomas F |
| Abstract: | Financial intermediaries can choose the extent to which they want to be active investors, providing valuable services like advice, support and corporate governance. We examine the determinants of the decision to become an active financial intermediary using a hand-collected dataset on European venture capital deals. We find organizational specialization to be a key driver. Venture firms which are independent and focused on venture capital alone get more involved with their companies. The human capital of venture partners is another key driver of active financial intermediation. Venture firms whose partners have prior business experience or a scientific education provide more support and governance. These results have implications for prevailing views of financial intermediation, which largely abstract from issues of specialization and human capital. |
| Keywords: | financial intermediation; human capital; specialization |
| JEL: | G20 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4794&r=ent |
| By: | Gavin C. Reid |
| Abstract: | This paper uses statistical analysis to characterise ‘industry practice’, in terms of concordance of investors concerning appropriate practice. The evidence was gathered by field work methods in 2000-01, and refers to the practices of twenty UK venture capital investors, who accounted for the bulk of funds allocated to high technology investments in the UK. This paper has two parts: general and detailed statistical analysis. 1) In the first part, the main finding is of a coherent (and generally statistically significant picture) of investor conduct towards high-technology companies. Thus it is found that investors assign risk premia and expected values, and use risk classes. They adopt relatively short time horizons, but follow quite sophisticated procedures in investment appraisal. For example, they use sensitivity analysis, cash flow prediction, financial modelling, and decision trees. However, they miss out in some sophisticated areas of technical analysis, including Value at Risk (VaR), and simulation methods (including Monte Carlo methods). 2) The second part of the paper focuses on risk, factors influencing it, and innovation. Its aim is to discover if there is a kind of ‘industry standard’ or consensus about what is most important to investors in the high technology area. Largely, that turned out to be the case. The UK venture capitalists are agreed on what are high-risk and low-risk investments. They also agree on what are the key commercial factors affecting risk. However, when it comes to non-commercial factors, this consensus starts to crumble. Finally, so far as features of innovation are concerned, industry consensus starts to break down entirely. Thus, there do remain important areas in which investor practice is opaque. Therefore, there remains a need for further research into investor practice in the UK. |
| Keywords: | Venture Capital, Risk Management, High-Technology, Fieldwork |
| JEL: | G24 D81 L84 M21 L21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0206&r=ent |
| By: | Yi-Ping Tseng (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Mark Wooden (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) |
| Abstract: | Working hours in Australia are quite widely distributed around the population mean. That is, there are relatively many people working both relatively short hours and relatively long hours each week. From a welfare perspective, however, it is not the actual number of hours worked that is of importance, but whether the hours being worked are consistent with individual preferences. In this paper the question of how closely hours preferences are being met is examined using data collected in the first wave of the HILDA Survey. The study focuses specifically on workers in couple households. The analysis involved two main stages. In the first stage, evidence of a significant time divide - the co-existence of many people working part-time hours who would prefer to work longer and many people working very long hours who ould prefer to work fewer hours - is found. The extent of this time divide, however, should not be overstated - the hours of the majority of workers are still reasonably close to their stated preference. The second stage of the analysis focused on identifying the factors associated with mismatch in working hours preferences. The extent of overemployment, for example, is found to rise with age, and is more pronounced among the self-employed and less pronounced among those with a recent history of unemployment. Underemployment, on the other hand, is also associated positively with self-employment, as well as with casual employment. Perhaps of most interest, we find that in couples preferred hours are influenced by whether or not, and the extent to which, partners achieve their working time preferences. That is, if one member of the couple is unable to work as many hours as desired, this leads their partner to prefer more hours. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2005n07&r=ent |
| By: | Sembenelli, Alessandro; Siotis, Georges |
| Abstract: | A short review of the theoretical and empirical evidence indicates that foreign direct investment (FDI) has the potential to increase the intensity of competition as well as to act as a channel for technology transfers. One would expect, all else equal, an increase in average firm performance following a wave of FDI, as multinational corporations (MNCs) enjoy higher levels of efficiency and have the potential to generate positive spillovers. At the same time, the entry of foreign firms has also been associated with an increase in competitive pressure on the domestic market. Using a large firm level dataset covering all sectors of Spanish manufacturing during the period 1983-96, we disentangle these three effects by estimating a dynamic model of firm level performance, which we proxy by profitability. We find that FDI has a positive long-run effect on the profitability of target firms, but this is limited to firms belonging to R&D intensive sectors. In addition, the results indicate that foreign presence dampens margins. However, this effect appears to be more than compensated by positive spillovers in the case of knowledge intensive industries. |
| Keywords: | competition; efficiency; foreign direct investment; GMM; panel data; technology transfer |
| JEL: | F23 L40 L60 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4903&r=ent |
| By: | Gavin C. Reid; Julia A. Smith |
| Abstract: | This paper constructs a model of long-run performance for SMEs that have received venture capital backing. The model explains performance by financial structure. FAME data are used for estimating performance equations over the period 1989 to 2004 for UK businesses in their post-investment period. The econometrics uses robust techniques, including least absolute error (LAE) and Tukey trimean estimation. It is shown that the key determinants of performance (measured by ROSF) are profit margins and risk, with lesser, but significant, roles played by liquidity and gearing. The sample is used to identify consistently high performers, and chronic low performers. From the latter group, two detailed case studies illustrate how chronic low performance can emerge, in each case caused by failure to achieve technological milestones, and thereby failing, ultimately, to convince investors of potential company worth. |
| Keywords: | Venture capital, investment performance, LAE estimation, research milestones |
| JEL: | G24 G32 L25 M13 O32 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0503&r=ent |
| By: | Daniel Tarka (University of Greenwich, London); Kanes Rajah (University of Greenwich,London) |
| Abstract: | This article explores two of the five major factors that determine success in high-growth small and medium-sized enterprises (SMEs). Research has shown that the internal characteristics of SMEs such as technology strategy and the demographics of the management team are critical and related to the organisational success. High-growth SMEs have been defined as innovative technology companies that introduce new products or services, opening new channels of distribution, pioneering novel production methods and management approaches. A sectorial classification* of “high technology” industries developed at the Department of Trade and Industry was used as a basis for selecting the sample in the study. This embraces the communications, IT, computing, biotechnology, electronics, and medical / life sciences industries. |
| Keywords: | Small firms, success, high-growth, technology strategy, management team. |
| JEL: | E |
| Date: | 2005–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0506006&r=ent |
| By: | Joachim Wagner (University of Lueneburg) |
| Abstract: | Using a large recent representative sample of the adult German population this paper demonstrates that nascent necessity and nascent opportunity entrepreneurs are different with respect to some of the characteristics and attitudes considered to be important for becoming a nascent entrepreneur, and that they behave differently. Given the lack of longitudinal data, however, we have no information about the performance of entrepreneurs from both groups in the longer run. |
| Keywords: | Necessity entrepreneurship, opportunity entrepreneurship, Germany, REM |
| JEL: | J |
| Date: | 2005–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0506004&r=ent |
| By: | Arnab Bhattacharjee |
| Abstract: | This Paper considers empirical work relating to models of firm dynamics. It is shown that a hazard regression model for firm exits, with a modification to accommodate age-varying covariate effects, provides an adequate framework accommodating many of the features of interest in empirical studies on firm dynamics. Modelling implications of some of the popular theoretical models are considered and a set of empirical procedures for verifying theoretical implications of the models are proposed.The proposed hazard regression models can accommodate negative effects of initial size that increase to zero with age (active learning model), negative initial size effects that may increase with age, but stay permanently negative (passive learning model), conditional and unconditional hazard rates that decrease with age at higher ages, and adverse effects of macroeconomic shocks that decrease with age of the firm.The methods are illustrated using data on quoted UK firms. Consistent with the active learning model, the effect of initial size is significantly negative for a young firm and falls to zero with age.The hazard function conditional on size, other firm and industry-level characteristics, and macroeconomic conditions decreases with age only at higher ages, but shows the weaker property of Increasing Mean Residual Life over its entire life-duration. Instability in exchange rates affects survival of very young firms strongly, and the effect decreases to insignificant levels for older firms. |
| Keywords: | Firm exit, Learning, Firm Dynamics, Non-proportional hazards, Hazard regression models |
| JEL: | C14 C34 C41 C52 D83 L16 L25 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0502&r=ent |
| By: | Bernadette Power; Gavin C. Reid |
| Abstract: | This paper examines the relationship between firm size, competitive strategy and performance, for the long-lived small firm in Scotland. It uses structural modelling to test the hypothesis that small firms need to remain small if they are to be long-lived. In a three-equation simultaneous model, performance, size and the dimensions of the competitive strategy of the firm are jointly determined. Econometric estimates of the three equations are reported, using 2SLS and iterated 3SLS. A trade-off is found to exist between firm size and performance. Further, we find that to attain higher equilibrium values of performance, a varied competitive strategy needs to be adopted. Our prescription is that small firms need to adjust downwards in size, and to cultivate a more varied competitive strategy, if there the entrepreneurs are to have a positive influence on performance, thus promoting longevity of their firms. |
| Keywords: | Performance, Small Firms, Size, Competitive Strategy, Simultaneity |
| JEL: | C42 D21 G33 L2 M13 M21 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0307&r=ent |
| By: | Knut R. Wangen (Statistics Norway) |
| Abstract: | The seminal paper by Pissarides and Weber (1989) is one of several previous studies trying to measure the size of the black economy. Pissarides and Weber compared the relationship between food expenditure and income in two groups of workers, self-employed and employees in employment, assuming that employees reported income correctly. For a given level of reported income, the self-employed had a higher food expenditure than employees. Pissarides and Weber concluded that self-employed's actual income was 1.55 times reported income, and that this part of the black economy was about 5.5 percent of GDP in the UK in 1982. Presumably due to a too informal argumentation, Pissarides and Weber's estimators are not entirely correct and alternative estimators have been overlooked. In all, I suggest three different interval estimators for mean under-reporting. The first is obtained by formally solving optimization problems which Pissarides and Weber tried to solve informally. The other two follows from recognizing, and incorporating, parameter restrictions which were not fully appreciated. |
| Keywords: | Self-Employment; Under-Reporting of Income; Household Consumption; Black Economy; Informal Sector. |
| JEL: | D31 E21 H26 H31 J23 O17 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:414&r=ent |
| By: | Thomas Piketty; Gilles Postel-Vinay; Jean-Laurent Rosenthal |
| Abstract: | Using large samples of estate tax returns we construct new series on wealth concentration in Paris and France from 1807 to 1994. Wealth concentration in Paris and in France increased until World War I and then fell abruptly. The rise in inequality prior to WWI accelerated (rather than stabilized) during the 1860-1913 period. This was largely driven by the growth of large industrial and financial estates and coincided with the decline of aristocratic fortunes (until the 1840s, the share of aristocrats and real estate in top estates was actually rising). The decline in wealth concentration that followed World War I appears to have been prompted by the 1914-1945 shocks rather than by a two-sector, Kuznets-type process. Inequality fell both in Paris and in the rest of France. Finally, individuals who lived on capital income rather than active entrepreneurs were responsible for the very high levels of wealth concentration observed on the eve of World War I. In the late nineteenth and early twentieth century top wealth holders were in their 70s and 80s, whereas they had been in their 50s in the early the nineteenth century and would be so again after WWII. These results shed new light on the ongoing debate about wealth inequality and growth in the presence of capital constraints. |
| Keywords: | wealth concentration, inequality |
| JEL: | J14 N20 H20 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:lea:leawpi:0504&r=ent |