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JEL Codes: O16, G20, L26 Abstract We explore whether financial constraints matter and which financial constraints matter the most in the choice of becoming an entrepreneur. We exploit a randomly assigned welfare program in rural Mexico to show that cash transfers significantly increase entry into entrepreneurship, thereby providing evidence of financial constraints. We then develop a simple model to highlight how liquidity and insurance constraints respond differently to the time profile ofdoi:10.2139/ssrn.1784263 fatcat:hpjw7xfuuvbajaickv2zajop5i