Effect of Financial Literacy on Starting a New Business: Using Survival Analysis to Examine Differences between Older and Younger Entrepreneurs

30 Pages Posted: 22 Mar 2021

See all articles by ESIC Market Submitter

ESIC Market Submitter

ESIC Business&Marketing School

Felichism Kabo

University of Michigan at Ann Arbor - Institute for Social Research (ISR)

Date Written: December 16, 2020

Abstract

Objective: This paper focuses on financial literacy as an antecedent to entrepreneurial involvement in order to examine and better understand differences between older and younger entrepreneurs. Financial literacy is the ability to apply the knowledge and skills needed to effectively manage financial resources over the life-course and is related to a wide range of economic outcomes.

Methodology: The antecedence of financial literacy with respect to entrepreneurial engagement is examined using novel entrepreneurship data the United States. The study uses three waves (2014, 2016, and 2019) of complex survey data the Understanding America Study (UAS), a nationally representative and probability-based internet panel of households representing roughly 8,500 respondents ages 18 and older, and active since 2014. The data are used to generate survival curves using the Kaplan-Meier method, and to run survey linear and Cox proportional hazards regression models outcomes are starting a new business with respect to two time frames: over one’s lifetime, and since 2014.

Results: The results show that there are associations between financial literacy and the rate of starting a new business both over one’s lifetime and since 2014, but only among older adults.

Limitations: The study data were collected using a sample of adults in the United States which may limit the generalizability of the study findings to countries and regions other than the United States.

Practical implications: This paper presents evidence that indicates that financial literacy is correlated with business start-up activities among older adults. This implies that financial literacy programs targeted at older adults may have an appreciable and significant multiplier effect.

Keywords: Silver economy; financial literacy; entrepreneurship; business start-up; survival analysis; Cox proportional hazards regression; Kaplan-Meier method.

JEL Classification: G53, M13, J14.

Suggested Citation

Submitter, ESIC Market and Kabo, Felichism, Effect of Financial Literacy on Starting a New Business: Using Survival Analysis to Examine Differences between Older and Younger Entrepreneurs (December 16, 2020). Available at SSRN: https://ssrn.com/abstract=3788863 or http://dx.doi.org/10.2139/ssrn.3788863

ESIC Market Submitter (Contact Author)

ESIC Business&Marketing School ( email )

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HOME PAGE: http://www.esic.es/editorial/editorial_revista_esic.php?tematica=777

Felichism Kabo

University of Michigan at Ann Arbor - Institute for Social Research (ISR) ( email )

Ann Arbor, MI 48106-1248
United States

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