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Ability-heterogeneity, entrepreneurship, and economic growth

  • Jiang, Neville
  • Wang, Ping
  • Wu, Haibin

This paper develops an endogenous growth model of occupational choice with overlapping generations heterogeneous in entrepreneurial ability. While an increase in the number of entrepreneurs creates a growth-enhancing variety effect, the reduced overall quality of entrepreneurial ability retards growth. As a result, the number of entrepreneurs and output growth need not be positively related, in response to changes in the ability distribution. While cheaper financial operation and higher manufacturing productivity are both growth-enhancing, they have different effects on equilibrium factor prices and equilibrium financial markups. Additionally, the long-run growth consequences of subsidies to entrepreneurship and credit-market imperfections are studied.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 3 (March)
Pages: 522-541

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:3:p:522-541
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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