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Credit constraints, entrepreneurial talent, and economic development

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  • Bianchi, Milo

Abstract

In this paper, we formalize the view that economic development requires high rates of productive entrepreneurship, and this requires an efficient matching between entrepreneurial talent and production technologies. We first explore the role of financial development in promoting such efficient allocation of talent, which results in higher production, job creation, and social mobility. We then show how different levels of financial development may endogenously arise in a setting in which financial constraints depend on individual incentives to misbehave, these incentives depend on how many jobs are available, and this in turn depends on the level of financial development. Such complementarity between labor market and financial market development may generate highly divergent development paths even for countries with very similar initial conditions.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/5381/1/bianchi-FinDev_Entrepr.pdf
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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5381.

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Date of creation: 2010
Date of revision:
Publication status: Published in Small Business Economics, 2010, Vol. 34, no. 1. pp. 93-104.Length: 11 pages
Handle: RePEc:dau:papers:123456789/5381

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Keywords: Allocation of entrepreneurial talent; Credit constraints; Economic development; Productive and unproductive entrepreneurs;

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Cited by:
  1. Zhang, Weiying & Cooper, W.W. & Deng, Honghui & Parker, Barnett R. & Ruefli, Timothy W., 2010. "Entrepreneurial talent and economic development in China," Socio-Economic Planning Sciences, Elsevier, vol. 44(4), pages 178-192, December.
  2. Saraswat, Deepak, 2011. "Effect of employment guarantee on access to credit: Evidence from rural India," MPRA Paper 34671, University Library of Munich, Germany, revised 13 Nov 2011.
  3. Garcia-Murillo, Martha & Velez-Ospina, Jorge Andres & Vargas-Leon, Patricia, 2012. "Where should governments invest? The impact of economic, political, social and technological factors on the formation of new firms," 23rd European Regional ITS Conference, Vienna 2012 60400, International Telecommunications Society (ITS).

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