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Entrepreneurship, Saving and Social Mobility

  • Vincenzo Quadrini

    (Duke University and CEPR)

This paper examines entrepreneurship in order to analyze, first, the degree to which the opportunity to start or own a business affects the household's saving behavior and the implication of this behavior for the distribution of wealth and, second, the relationship between the extent of entrepreneurship in the economy and socioeconomic mobility, that is, the movement of families across wealth classes over time. First, a number of stylized facts based on data from the Panel Study of Income Dynamics and the Survey of Consumer Finances are outlined. They show relevant differences in asset holdings and wealth mobility between entrepreneurs and workers. Second, a dynamic general equilibrium model with an explicit formalization of the entrepreneurial choice is developed. Through the modeling of the entrepreneurial activities, the model generates a concentration of wealth similar to the one observed in the U.S. economy and it replicates the main patterns of wealth mobility in which entrepreneurs experience higher upward mobility than workers. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0077
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 3 (2000)
Issue (Month): 1 (January)
Pages: 1-40

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Handle: RePEc:red:issued:v:3:y:2000:i:1:p:1-40
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  1. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
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  15. Behrman, Jere R & Taubman, Paul, 1990. "The Intergenerational Correlation between Children's Adult Earnings and Their Parents' Income: Result from the Michigan Panel Survey of Income Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 115-27, June.
  16. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
  17. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
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