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Occupational choice and the quality of entrepreneurs

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  • Inci, Eren

Abstract

This paper is the first to endogenize both risk-free interest and wage rates in a tractable occupational choice model. Individuals who differ in terms of entrepreneurial ability and wealth choose between entrepreneurship and wage-earning, and the wealth classes form endogenously. Because of the general equilibrium repercussions of policies, whether to tax or subsidize entrepreneurs depends crucially on the shape of the wealth distribution. In particular, a tax on entrepreneurs used to subsidize workers can sometimes increase the average quality of entrepreneurs. Unlike the previous studies, in all of which the risk-free interest rate is exogenous, the policy works by affecting the loan supply to the banks via swapping some low-ability upper-middle-class entrepreneurs with an equal number of high- and low-ability poor-class workers.

Suggested Citation

  • Inci, Eren, 2013. "Occupational choice and the quality of entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 1-21.
  • Handle: RePEc:eee:jeborg:v:92:y:2013:i:c:p:1-21
    DOI: 10.1016/j.jebo.2013.04.015
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    Cited by:

    1. Rocha, Vera & Carneiro, Anabela & Amorim Varum, Celeste, 2015. "Serial entrepreneurship, learning by doing and self-selection," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 91-106.
    2. Elert, Niklas & Andersson, Fredrik W. & Wennberg, Karl, 2015. "The impact of entrepreneurship education in high school on long-term entrepreneurial performance," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 209-223.
    3. Mehmet Bac & Eren Inci, 2010. "The Old‐Boy Network and the Quality of Entrepreneurs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(4), pages 889-918, December.
    4. Inci, Eren, 2006. "Success breeds success locally: a tale of incubator firms," ZEW Discussion Papers 06-071, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Eren Inci & Simon C. Parker, 2013. "Financing Entrepreneurship and the Old-Boy Network," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 232-258, June.
    6. Coco, Giuseppe & Pignataro, Giuseppe, 2014. "The poor are twice cursed: Wealth inequality and inefficient credit market," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 149-159.
    7. Tuomas Takalo & Otto Toivanen, 2012. "Entrepreneurship, Financiership, and Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 601-628, June.
    8. repec:rom:mancon:v:11:y:2017:i:1:p:871-877 is not listed on IDEAS

    More about this item

    Keywords

    Entrepreneurship; Entrepreneurial policy; General equilibrium contract theory; Occupational choice;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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