TY - JOUR
T1 - Entrepreneurship, frictions, and wealth
AU - Cagetti, Marco
AU - De Nardi, Mariacristina
PY - 2006/10
Y1 - 2006/10
N2 - This paper constructs and calibrates a parsimonious model of occupational choice that allows for entrepreneurial entry, exit, and investment decisions in the presence of borrowing constraints. The model fits very well a number of empirical observations, including the observed wealth distribution for entrepreneurs and workers. At the aggregate level, more restrictive borrowing constraints generate less wealth concentration and reduce average firm size, aggregate capital, and the fraction of entrepreneurs. Voluntary bequests allow some high-ability workers to establish or enlarge an entrepreneurial activity. With accidental bequests only, there would be fewer very large firms and less aggregate capital and wealth concentration.
AB - This paper constructs and calibrates a parsimonious model of occupational choice that allows for entrepreneurial entry, exit, and investment decisions in the presence of borrowing constraints. The model fits very well a number of empirical observations, including the observed wealth distribution for entrepreneurs and workers. At the aggregate level, more restrictive borrowing constraints generate less wealth concentration and reduce average firm size, aggregate capital, and the fraction of entrepreneurs. Voluntary bequests allow some high-ability workers to establish or enlarge an entrepreneurial activity. With accidental bequests only, there would be fewer very large firms and less aggregate capital and wealth concentration.
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U2 - 10.1086/508032
DO - 10.1086/508032
M3 - Article
AN - SCOPUS:33750947303
SN - 0022-3808
VL - 114
SP - 835
EP - 870
JO - Journal of Political Economy
JF - Journal of Political Economy
IS - 5
ER -