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Journal Articles Small Business Economics Year : 2005

The Winner's Curse of Human Capital


We extend a model developed by Evans and Jovanovic (1989) to explain when start-ups are credit constrained. We show that the magnitude of the credit constraint is conditioned by the relative productivity of human capital in both wage work and self-employment. The effect of predicted household income on start-up capital is used to indicate the existence of financial constraint. Empirical analysis reveals that entrepreneurs with high human capital have both greater financial wealth and greater levels of start-up capital pointing to the endogenous nature of credit constraints. High human capital relaxes financial constraints, apparently due to greater productivity of human capital in wage work than in self-employment. Those who are the least likely to be credit constrained in self-employment are those that are least likely to switch into self-employment,and vice versa.

Dates and versions

hal-00476901 , version 1 (27-04-2010)



Thomas Astebro, I. Bernhardt. The Winner's Curse of Human Capital. Small Business Economics, 2005, 24 (1), pp.63-78. ⟨10.1007/s11187-005-3097-y⟩. ⟨hal-00476901⟩


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