Spouses, children and entrepreneurship

Abstract

We develop a model of endogenous entrepreneurship and marriage. Spouses influence entrepreneurship via three channels: they reduce benefits by working less the more profitable the business is, they reduce costs by working more in case of business failure, and children, associated with a spouse, increase the cost of failure. We use administrative matched owner-employer-employee spouse data to estimate the specifications derived from our model. The model is informative on the sources of endogeneity and the IV strategy. We show that higher marriage rates induce less entry but larger firms on average. Through the lens of our model, marriage increases firm productivity.