Motives for Entrepreneurial Saving: Evidence from Sweden

Abstract

This paper investigates the motives for the high saving rates of entrepreneurial households. We use a unique dataset that links Swedish households’ wealth and income to the financial statements of their firms. We exploit the decision to enter, stay in entrepreneurship or leave it. In comparison to the rest of the population, entrepreneurs save one percent more of their income a year before starting a business and 1.9 percent more on their personal accounts while in business. We find that the elevated saving rates among business owners are consistent with the precautionary saving motive among owners of unlimited liability firms and with investment related reasons among owners of limited liability firms. They save on their personal and business accounts. We provide suggestive evidence that entrepreneurs respond to income risk or lack of investment capital by increasing their saving rate.