Credit Constraints, Idiosyncratic Risks, and the Wealth Distribution in a Heterogeneous Agent Model
AbstractThis paper examines the effects of credit market imperfections and idiosyncratic risks on occupational choice, capital accumulation, as well as on the income and wealth distribution in a two sectore heterogeneous agent general equilibrium model. Workers and firm owners are subject to idiosyncratic shocks. Entrepreneurship is the riskier occupation. Compared to an economy with perfect capital markets, we find for the case of serially correlated shocks that more individuals choose the entrepreneurial profession in the presence of credit consraints, and that the fluctuation between occupationa increase too. Workers and entrepreneurs with high individual productivity tend to remain in their present occupantion, whereas low productivity individuals are more likely to switch between professions. Interestingly, these results reverse if we assume iid shocks, thus indicating that the nature of the underlying shocks plays an important role for the general equilibrium effects. In general, the likelihood of entrepreneurship increases with individual wealth.
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Bibliographic InfoPaper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 46.
Length: 31 pages
Date of creation: Mar 2007
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DSGE model; wealth distribution; occupational choice; credit constraints;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D3 - Microeconomics - - Distribution
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D9 - Microeconomics - - Intertemporal Choice
- G0 - Financial Economics - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-BEC-2007-04-09 (Business Economics)
- NEP-DGE-2007-04-09 (Dynamic General Equilibrium)
- NEP-ENT-2007-04-09 (Entrepreneurship)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joachim Wagner, 2006.
"International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms,"
Papers on Entrepreneurship, Growth and Public Policy
2006-15, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
- Wagner, Joachim, 2006. "International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms," HWWA Discussion Papers 344, Hamburg Institute of International Economics (HWWA).
- Joachim Wagner, 2006. "International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms," Working Paper Series in Economics 25, University of Lüneburg, Institute of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Wagner).
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