Advanced Search
MyIDEAS: Login

How Well Does the Market Allocate Entrepreneurs?

Contents:

Author Info

  • Baochun Peng
Registered author(s):

    Abstract

    This paper offers a synthesis of two Schumpeterian views: that growth is driven by innovation, and that the level of financial market development affects the growth process. We adopt an endogenous growth model where growth is driven by R&D activities of entrepreneurs. Entrepreneurs must borrow to fund R&D, but heterogeneity and unobservability of entrepreneurial ability creates credit restriction. The extent of financial market development is defined as the number of high ability agents in the financial market. Having a more developed financial market facilitates the allocatin of resources to the innovation sector, at the same time reduces the number of entrepreneurs available to the innovation sector. We characterize equilibrium in the financial market, and find that market allocation of entrepreneurs only coincides with the growth maximising allocation when all value created by innovation are divided by entrepreneurs, otherwise the market allocation is typically not growth maximising, and low grow trap may exist.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.st-andrews.ac.uk/crieff/papers/crieff0025.pdf
    Our checks indicate that this address may not be valid because: 404 Not Found (http://www.st-andrews.ac.uk/crieff/papers/crieff0025.pdf [301 Moved Permanently]--> http://crieff.wordpress.com/papers/crieff0025.pdf). If this is indeed the case, please notify (Bram Boskamp)
    Download Restriction: no

    Bibliographic Info

    Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0025.

    as in new window
    Length:
    Date of creation: Feb 2000
    Date of revision:
    Handle: RePEc:san:crieff:0025

    Contact details of provider:
    Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
    Phone: 01334 462420
    Fax: 01334 462438
    Web page: http://crieff.wordpress.com/
    More information through EDIRC

    Related research

    Keywords: Growth; Entrepreneurship; Financial market;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
    2. Roubini, Nouriel & Sala-i-Martin, Xavier, 1995. "A growth model of inflation, tax evasion, and financial repression," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 275-301, April.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    4. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    5. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
    6. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February.
    7. Cooley, Thomas F. & Smith, Bruce D., 1998. "Financial markets, specialization, and learning by doing," Research in Economics, Elsevier, vol. 52(4), pages 333-361, December.
    8. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
    9. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
    10. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers 646, Yale - Economic Growth Center.
    11. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
    12. LeRoy, Stephen F & Singell, Larry D, Jr, 1987. "Knight on Risk and Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 394-406, April.
    13. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
    14. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
    15. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    16. Bencivenga, Valerie R. & Smith, Bruce D., 1998. "Economic development and financial depth in a model with costly financial intermediation," Research in Economics, Elsevier, vol. 52(4), pages 363-386, December.
    17. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
    18. Zsolt Becsi & Ping Wang & Mark A. Wynne, 1998. "Endogenous market structures and financial development," Working Paper 98-15, Federal Reserve Bank of Atlanta.
    19. Jayaratne, Jith & Strahan, Philip E, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 639-70, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:san:crieff:0025. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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