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A General Equilibrium Self-Employment Theory based on Human Capital Differences


  • Gerardo Jacobs


Since a big proportion of the labor force in developing countries belongs to the self-employment sector, it is desirable to build models to study these dynamics. Previous works study the occupational choices of agents. The most recent ones build general equilibrium economies with three types of agents: entrepreneurs, workers and self-employees. Unfortunately, in theses works at equilibrium, workers are poorer than agents in self-employment. Data for developing countries shows that self-employment provides a subsistence level for most agents, with workers earning a higher level of income. This work builds a general equilibrium model that is consistent with this observation

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  • Gerardo Jacobs, 2004. "A General Equilibrium Self-Employment Theory based on Human Capital Differences," Econometric Society 2004 Latin American Meetings 270, Econometric Society.
  • Handle: RePEc:ecm:latm04:270

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    References listed on IDEAS

    1. 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.
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    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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