Entrepreneurial skills, technological progress and firm growth

One recent empirical regularity is that Örm-growth is negatively related to Örmís age. Besides, employment-age proÖles are áatter in less developed economies, but it is also observed áatter employmentage proÖles among fast growing economies rather than in slow growing economies. This paper develops an occupational choice life-cycle model based on Guner et al. (2015), where entrepreneursískills determine entrepreneurial technology in a similar way to Poschke (2015). We consider that exogenous technological advances imply a higher degree of complexity. Entrepreneursí skills determine the degree of complexity they can manage. As in Guner et al. (2015), entrepreneurs invest in their skills over their life-cycle. But, unlike Guner et al. (2015), entrepreneursí skills depreciation depends also on the rhythm at which skills of newborn entrepreneurs are growing. The empirical implication of the stationary equilibrium concerning Örm growth is consistent with these observed facts This paper develops an occupational choice life-cycle version of Lucas (1978) span-of-control model based on the assumption that entrepreneurs' skills determine entrepreneurial technology in a similar way to Poschke (2015). We consider that there are exogenous technological advances in the economy and that new advances imply a higher degree of complexity. Entrepreneurs' skills determine the degree of complexity they can manage and, hence, the degree of adoption of new technologies. As in Guner et al. (2015), entrepreneurs invest in their skills over their life-cycle. But, unlike Guner et al. (2015), entrepreneurs' skills investment also depends on the depreciation of their relative skill with respect to newborn entrepreneurs' skills. Faster exogenous growth of technological advances can lead to a higher firms' productivity growth over their life cycle, but also may imply a higher depreciation of old entrepreneurs abilities. We analyze the empirical implications of the stationary equilibrium concerning firms' age-TFP profile, employment-age profile, managers' income life-cycle profile, and aggregate TFP growth depending on the country's level of development and growth rate of technological advances.