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Credit Constraints, Entrepreneurial Talent, and Economic Development

  • Milo Bianchi

    ()

    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)

In this paper, we formalize the view that economic development requires high rates of productive entrepreneurship, and this requires an e¢ cient matching between entrepreneurial talent and production technologies. We rst explore the role of nancial development in promoting such e¢ cient allocation of talent, which results in higher production, job creation and social mobility. We then show how di¤er- ent levels of nancial development may endogenously arise in a setting in which nancial constraints depend on individual incentives to mis- behave, these incentives depend on how many jobs are available, and this in turn depends on the level of nancial development. Such com- plementarity between labor market and nancial market development may generate highly divergent development paths even for countries with very similar initial conditions.

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Paper provided by HAL in its series Post-Print with number halshs-00636002.

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Date of creation: 2010
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Publication status: Published, Small Business Economics, 2010, 93-104
Handle: RePEc:hal:journl:halshs-00636002
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00636002/en/
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