IDEAS home Printed from https://ideas.repec.org/a/wly/soecon/v82y2016i3p952-974.html
   My bibliography  Save this article

All entrepreneurial productivity increases are not created equal

Author

Listed:
  • Arup Bose
  • Debashis Pal
  • David E. M. Sappington

Abstract

We examine the impact of productivity increases in a setting where wealth‐constrained entrepreneurs are privately informed about whether their project will succeed with high (pH) or low (pL) probability. Not surprisingly, many productivity increases (e.g., an increase in pH) generate gains for entrepreneurs and/or venture capitalists. However, some productivity increases (e.g., an increase in pL) can generate widespread losses. Furthermore, entrepreneurs with low‐productivity projects can benefit more from policies that increase the productivity of high‐quality projects than from policies that increase their own productivity. Therefore, the design of policy to enhance welfare in the entrepreneurial sector can entail important subtleties.

Suggested Citation

  • Arup Bose & Debashis Pal & David E. M. Sappington, 2016. "All entrepreneurial productivity increases are not created equal," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 952-974, January.
    • Handle: RePEc:wly:soecon:v:82:y:2016:i:3:p:952-974
    DOI: 10.1002/soej.12032
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/soej.12032
    Download Restriction: no
    File URL: https://libkey.io/10.1002/soej.12032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jaimovich, Esteban, 2011. "Sectoral differentiation, allocation of talent, and financial development," Journal of Development Economics, Elsevier, vol. 96(1), pages 47-60, September.
    2. Inci, Eren, 2013. "Occupational choice and the quality of entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 1-21.
    3. Laura Abramovsky & Erich Battistin & Emla Fitzsimons & Alissa Goodman & Helen Simpson, 2011. "Providing Employers with Incentives to Train Low-SkilledWorkers: Evidence from the UK Employer Training Pilots," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 153-193, January.
    4. Edwin Leuven & Hessel Oosterbeek, 2004. "Evaluating the Effect of Tax Deductions on Training," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 461-488, April.
    5. James Heckman, 1998. "What should be our human capital investment policy?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 103-119, May.
    6. Chowdhury, Prabal Roy, 2005. "Group-lending: Sequential financing, lender monitoring and joint liability," Journal of Development Economics, Elsevier, vol. 77(2), pages 415-439, August.
    7. Gupta, Barnali & Katz, Amoz & Pal, Debashis, 1994. "Upstream monopoly, downsteam competition and spatial price discrimination," Regional Science and Urban Economics, Elsevier, vol. 24(5), pages 529-542, October.
    8. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, vol. 60(1), pages 195-228, October.
    9. Jimenez, Gabriel & Salas, Vicente & Saurina, Jesus, 2006. "Determinants of collateral," Journal of Financial Economics, Elsevier, vol. 81(2), pages 255-281, August.
    10. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
    11. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    12. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097, Elsevier.
    13. Arup Bose & Debashis Pal & David E.M. Sappington, 2011. "Pareto-improving inefficiency," Oxford Economic Papers, Oxford University Press, vol. 63(1), pages 94-110, January.
    14. Gupta, Barnali & Heywood, John S. & Pal, Debashis, 1995. "Strategic behavior downstream and the incentive to integrate: A spatial model with delivered pricing," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 327-334, September.
    15. Krueger, Alan & Rouse, Cecilia, 1998. "The Effect of Workplace Education on Earnings, Turnover, and Job Performance," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 61-94, January.
    16. Anant, T. C. A. & Basu, Kaushik & Mukherji, Badal, 1995. "A model of monopoly with strategic government intervention," Journal of Public Economics, Elsevier, vol. 57(1), pages 25-43, May.
    17. Ghatak, Maitreesh & Morelli, Massimo & Sjostrom, Tomas, 2007. "Entrepreneurial talent, occupational choice, and trickle up policies," Journal of Economic Theory, Elsevier, vol. 137(1), pages 27-48, November.
    18. Fletcher Deborah & Slutsky Steven, 2010. "Bad Government Can Be Good Politics: Political Reputation, Negative Campaigning, and Strategic Shirking," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-58, May.
    19. de Meza, David & Webb, David, 2000. "Does credit rationing imply insufficient lending?," Journal of Public Economics, Elsevier, vol. 78(3), pages 215-234, November.
    20. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Debashis Pal & David Sappington & Ying Tang, 2012. "Sabotaging cost containment," Journal of Regulatory Economics, Springer, vol. 41(3), pages 293-314, June.
    2. Alessandro Spiganti, 2022. "Wealth Inequality and the Exploration of Novel Alternatives," Working Papers 2022:02, Department of Economics, University of Venice "Ca' Foscari".
    3. Laura Abramovsky & Erich Battistin & Emla Fitzsimons & Alissa Goodman & Helen Simpson, 2011. "Providing Employers with Incentives to Train Low-SkilledWorkers: Evidence from the UK Employer Training Pilots," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 153-193, January.
    4. Petrick, Martin, 2004. "Governing Structural Change And Externalities In Agriculture: Toward A Normative Institutional Economics Of Rural Development," IAMO Discussion Papers 14878, Institute of Agricultural Development in Transition Economies (IAMO).
    5. Martins, Pedro S., 2021. "Employee training and firm performance: Evidence from ESF grant applications," Labour Economics, Elsevier, vol. 72(C).
    6. David B. Audretsch & Erik E. Lehmann, 2013. "Corporate governance in newly listed companies," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 9, pages 179-206, Edward Elgar Publishing.
    7. David P. Brown & David E. M. Sappington, 2021. "On the profitability of self‐sabotage," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 68-91, February.
    8. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.
    9. Inci, Eren, 2013. "Occupational choice and the quality of entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 1-21.
    10. Christian Pietro & Marco Maria Sorge, 2018. "Outside (option) in the orchard: lemons or peaches?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(4), pages 555-564, December.
    11. Giuseppe Coco & Giuseppe Pignataro, 2013. "Unfair credit allocations," Small Business Economics, Springer, vol. 41(1), pages 241-251, June.
    12. Alessandro Spiganti, 2020. "Inequality of opportunity, inequality of effort, and innovation," Economics Working Papers MWP 2020/02, European University Institute.
    13. Gokmen, Gunes & Morin, Annaig, 2021. "Investment shocks and inequality dynamics," Economic Modelling, Elsevier, vol. 94(C), pages 570-579.
    14. Heywood, John S. & Pal, Debashis, 1996. "How to tax a spatial monopolist," Journal of Public Economics, Elsevier, vol. 61(1), pages 107-118, July.
    15. Coco, Giuseppe & Pignataro, Giuseppe, 2014. "The poor are twice cursed: Wealth inequality and inefficient credit market," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 149-159.
    16. van Rijn, Jordan, 2018. "The Effect of Membership Expansion on Credit Union Risk and Returns," Staff Paper Series 588, University of Wisconsin, Agricultural and Applied Economics.
    17. Engel, Dirk, 2002. "The Impact of Venture Capital on Firm Growth: An Empirical Investigation," ZEW Discussion Papers 02-02, ZEW - Leibniz Centre for European Economic Research.
    18. Bauchet, Jonathan & Chakravarty, Sugato & Hunter, Brian, 2018. "Separating the wheat from the chaff: Signaling in microfinance loans," World Development, Elsevier, vol. 106(C), pages 40-50.
    19. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs In Economics," Working Papers 1118, Princeton University, Department of Economics, Industrial Relations Section..
    20. Rui Baptista & Murat Karaöz & João Correia Leitão, 2020. "Diversification by young, small firms: the role of pre-entry resources and entry mistakes," Small Business Economics, Springer, vol. 55(1), pages 103-122, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:soecon:v:82:y:2016:i:3:p:952-974. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)2325-8012 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.