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This paper provides evidence that capital market imperfections hold back innovation and growth, and that public policy can complement capital markets. We deliver the evidence by studying the effects of government funding on the behavior of SMEs in Finland. By adapting the methodology recently proposed by Rajan and Zingales (1998) to firm-level data, we show that government funding disproportionately helps firms from industries that are dependent on external finance. We demonstrate that the result is economically significant and robust to a variety of tests.

We use elections data in which a large number of ties in vote counts between candidates are resolved via a lottery to study the personal incumbency advantage. We benchmark non‐experimental regression discontinuity design (RDD) estimates against the estimate produced by this experiment that takes place exactly at the cutoff. The experimental estimate suggests that there is no personal incumbency advantage. In contrast, conventional local polynomial RDD estimates suggest a moderate and statistically significant effect. Bias‐corrected RDD estimates that apply robust inference are, however, in line with the experimental estimate. Therefore, state‐of‐the‐art implementation of RDD can meet the replication standard in the context of close elections.

It is a well-documented empirical regularity that it is more satisfying to be self-employed than to work as an employee for an organization. A large part of this difference in job satisfaction is attributed in the literature to the strong perception of independence by the self-employed. In this paper we study people's time use as a source of entrepreneurial independence. By making use of disaggregated sequential microdata on people's time use, we are able to document that the self-employed work longer effective hours, as well as more in the evenings and weekends, than those employed by an organization. Even though being able to decide when to do one's work may be a sign of flexibility in time use, the self-employed have less pure leisure and are less frequently absent from work in general and when sick on weekdays in particular. Moreover, we document that the self-employed who have small children are more likely to work after 5 p.m., when the com-munal day-care centres close. Based on these findings it is not surprising that the self-employed perceive that they are more often under time pressure and in a hurry than those employed by an organization. Copyright 2007 Blackwell Publishing Ltd..