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Adverse Selection and Entrepreneurship in a Model of Development

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  • Esteban Jaimovich

Abstract

This paper presents a theory in which talented entrepreneurs are identified as the key agents driving the process of development and modernisation. Entrepreneurial skills are private information, which prevents full risk sharing. Development into a modern industrial economy might fail to take place, since potentially talented entrepreneurs may refrain from taking on the entrepreneurial risks as a way to avoid income shocks. An interesting feature of the model is the fact that the informational asymmetries are endogenous to the process of development, as they are related to the heterogeneity in entrepreneurial skills required in the manufacturing activities. Copyright The editors of the "Scandinavian Journal of Economics" 2010 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 112 (2010)
Issue (Month): 1 (03)
Pages: 77-100

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Handle: RePEc:bla:scandj:v:112:y:2010:i:1:p:77-100

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Cited by:
  1. Nishida, Keigo, 2012. "Credit constraints and the process of development," Economics Letters, Elsevier, vol. 116(3), pages 281-283.
  2. Braido, Luis & da Costa, Carlos & Dahlby, Bev, 2009. "Adverse Selection and Risk Aversion in Capital Markets," Working Papers 2009-15, University of Alberta, Department of Economics, revised 24 Mar 2009.
  3. Giuseppe Coco & Giuseppe Pignataro, 2013. "Unfair credit allocations," Small Business Economics, Springer, vol. 41(1), pages 241-251, June.
  4. Vera Catarina Rocha, 2012. "The entrepreneur in economic theory: from an invisible man toward a new research field," FEP Working Papers 459, Universidade do Porto, Faculdade de Economia do Porto.
  5. Inci, Eren, 2013. "Occupational choice and the quality of entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 1-21.

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