The impact of consumer credit access on self-employment and entrepreneurship

We examine how consumer credit access impacts self-employment and small business ownership by building a new dataset that links 3 million individual earnings and credit reports to pass-through tax records. We show that self-employment and employer business ownership increase with personal credit access. We isolate the causal impact of credit on both types of business owners by exploiting bankruptcy flag removals. Following flag removal, self-employed individuals earn and borrow more, and are also more likely to enter capital-intensive industries. Individuals are also more likely to own an employer business and borrow on average 33% ($40k) more after flag removal