Credit Constraints, Idiosyncratic Risks, and the Wealth Distribution in a Heterogeneous Agent Model
This paper examines the effects of credit market imperfections and idiosyncratic risks on occupational choice, capital accumulation, as well as on the income and wealth distribution in a two sectore heterogeneous agent general equilibrium model. Workers and firm owners are subject to idiosyncratic shocks. Entrepreneurship is the riskier occupation. Compared to an economy with perfect capital markets, we find for the case of serially correlated shocks that more individuals choose the entrepreneurial profession in the presence of credit consraints, and that the fluctuation between occupationa increase too. Workers and entrepreneurs with high individual productivity tend to remain in their present occupantion, whereas low productivity individuals are more likely to switch between professions. Interestingly, these results reverse if we assume iid shocks, thus indicating that the nature of the underlying shocks plays an important role for the general equilibrium effects. In general, the likelihood of entrepreneurship increases with individual wealth.
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- Joachim Wagner, 2006.
"International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms,"
Working Paper Series in Economics
25, University of Lüneburg, Institute of Economics.
- Joachim Wagner, 2006. "International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms," Papers on Entrepreneurship, Growth and Public Policy 2006-15, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
- Wagner, Joachim, 2006. "International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms," HWWA Discussion Papers 344, Hamburg Institute of International Economics (HWWA).
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