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Credit Constraints, Entrepreneurial Talent, and Economic Development

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  • Milo Bianchi

    ()
    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)

Abstract

In this paper, we formalize the view that economic development requires high rates of productive entrepreneurship, and this requires an e¢ cient matching between entrepreneurial talent and production technologies. We rst explore the role of nancial development in promoting such e¢ cient allocation of talent, which results in higher production, job creation and social mobility. We then show how di¤er- ent levels of nancial development may endogenously arise in a setting in which nancial constraints depend on individual incentives to mis- behave, these incentives depend on how many jobs are available, and this in turn depends on the level of nancial development. Such com- plementarity between labor market and nancial market development may generate highly divergent development paths even for countries with very similar initial conditions.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00636002.

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Date of creation: 2010
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Publication status: Published, Small Business Economics, 2010, 93-104
Handle: RePEc:hal:journl:halshs-00636002

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Keywords: Credit constraints; allocation of entrepreneurial talent; productive and unproductive entrepreneurs; economic development.;

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Cited by:
  1. 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).
  2. 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.
  3. 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.

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