Connecting Credit Access and Entrepreneurship

Tuck professor Gordon Phillips and a colleague from the University of Minnesota have received a grant from the Washington Center for Equitable Growth that will fund research on understanding how consumer credit affects entrepreneurship.

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Tuck professor Gordon Phillips and a colleague from the University of Minnesota have received a grant from the Washington Center for Equitable Growth that will fund research on understanding how consumer credit affects entrepreneurship.

The $47,700 grant, titled “The impact of consumer credit access on employment, earnings, and entrepreneurship,” will support the research of Gordon Phillips, the C.V. Starr Foundation Professor and faculty director of the Center for Private Equity and Entrepreneurship, and Kyle Herkenhoff, assistant professor of economics at the University of Minnesota, in their study of access to credit on key outcomes of interest, including business formation rates, earnings, and profitability.

“This important grant will enable the purchase of a large scale database of over four million individuals followed over the financial crisis,” says Phillips. “We will use this data to understand how credit access of entrepreneurs affected their ability to start up new businesses and also grow their existing businesses.”

According to the Washington Center for Equitable Growth, the research will provide a valuable contribution to understanding how micro-economic outcomes affect macro-economic performance via the innovation channel—a connection that has not yet been definitively established by other researchers. Additionally, given that credit access and debt forgiveness may impact macroeconomic growth in ways that are not yet understood, the study could influence policy responses to a future economic downturn.