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Occupational choice and the quality of entrepreneurs

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  • Inci, Eren

Abstract

This paper is the first to endogenize both risk-free interest and wage rates in a tractable occupational choice model. Individuals who differ in terms of entrepreneurial ability and wealth choose between entrepreneurship and wage-earning, and the wealth classes form endogenously. Because of the general equilibrium repercussions of policies, whether to tax or subsidize entrepreneurs depends crucially on the shape of the wealth distribution. In particular, a tax on entrepreneurs used to subsidize workers can sometimes increase the average quality of entrepreneurs. Unlike the previous studies, in all of which the risk-free interest rate is exogenous, the policy works by affecting the loan supply to the banks via swapping some low-ability upper-middle-class entrepreneurs with an equal number of high- and low-ability poor-class workers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 92 (2013)
Issue (Month): C ()
Pages: 1-21

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Handle: RePEc:eee:jeborg:v:92:y:2013:i:c:p:1-21

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Entrepreneurship; Entrepreneurial policy; General equilibrium contract theory; Occupational choice;

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References

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Citations

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Cited by:
  1. Tuomas Takalo & Otto Toivanen, 2012. "Entrepreneurship, Financiership, and Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 601-628, 06.
  2. Mehmet Bac & Eren Inci, 2010. "The Old-Boy Network and the Quality of Entrepreneurs," CESifo Working Paper Series 3071, CESifo Group Munich.
  3. Inci, Eren, 2006. "Success breeds success locally: a tale of incubator firms," ZEW Discussion Papers 06-71, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Eren Inci & Simon C. Parker, 2013. "Financing Entrepreneurship and the Old-Boy Network," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 232-258, 06.
  5. Vera Rocha & Anabela Carneiro & Celeste Amorim Varum, 2013. "Serial entrepreneurship, learning by doing and self-selection," CEF.UP Working Papers 1312, Universidade do Porto, Faculdade de Economia do Porto.

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