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Financial Capital, Human Capital, and the Transition to Self‐Employment: Evidence from Intergenerational Links

Syracuse UniversitySyracuse University

We use data from the National Longitudinal Surveys to investigate the relative importance of family financial and human capital in the transition into self‐employment. Specifically, we estimate the impacts of individual's own wealth and human capital and parental wealth and self‐employment experience on the probability that an individual transits from wage‐and-salary to self‐employment. We find young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition. In contrast, parents' capital exerts a large influence. Parents' strongest effect runs, not through financial means, but rather through their own self‐employment experience and business success.