Risk-bearing and entrepreneurship
In the “Knightian” theory of entrepreneurship, entrepreneurs provide insurance to workers by paying fixed wages and bear all the risk of production. This paper endogenizes entrepreneurial risk by allowing for optimal insurance contracts as well as the occupational selfselection. Moral hazard prevents full insurance; increases in an agent’s wealth then entail increases in risk borne. Thus, even under decreasing risk aversion, there are robust instances in which workers are wealthier than entrepreneurs. This empirically implausible result suggests that risk-based explanations for entrepreneurship are inadequate.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760, July.
- Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
- Edward P. Lazear, 2005. "Entrepreneurship," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 649-680, October.
- Edward P. Lazear, 2002. "Entrepreneurship," NBER Working Papers 9109, National Bureau of Economic Research, Inc.
- Morduch, Jonathan, 1994. "Poverty and Vulnerability," American Economic Review, American Economic Association, vol. 84(2), pages 221-225, May.
- Morduch, J., 1995. "Poverty and Vulnerability," Papers 477, Harvard - Institute for International Development.
- Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
- Ackerberg, D.A. & Botticini, M., 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 96, Boston University - Department of Economics.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 0096, Boston University - Industry Studies Programme.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Boston University - Institute for Economic Development 92, Boston University, Institute for Economic Development.
- Avinash Dixit, 2005. "Trade And Insurance With Imperfectly Observed Outcomes," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 5, pages 75-84 World Scientific Publishing Co. Pte. Ltd..
- Avinash Dixit, 1989. "Trade and Insurance with Imperfectly Observed Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 195-203.
- Jewitt, Ian, 1988. "Justifying the First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 56(5), pages 1177-1190, September.
- Dilip Mookherjee & Ivan Png, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 399-415.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
- Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Avinash Dixit, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 235-247.
- Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 769-797, August.
- Kim, Son Ku, 1995. "Efficiency of an Information System in an Agency Model," Econometrica, Econometric Society, vol. 63(1), pages 89-102, January.
- Banerjee, Abhijit V & Newman, Andrew F, 1994. "Poverty, Incentives, and Development," American Economic Review, American Economic Association, vol. 84(2), pages 211-215, May.
- W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
- Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
- Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
- repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
- Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
- Robert M. Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
- Brian Wu & Anne Marie Knott, 2006. "Entrepreneurial Risk and Market Entry," Management Science, INFORMS, vol. 52(9), pages 1315-1330, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:137:y:2007:i:1:p:11-26. 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: (Dana Niculescu)
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.