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Uninsurable Entrepreneurial Risk, Capital Market Imperfections, and Heterogeneity in the Macroeconomy

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  • Luo, Yulei
  • Zou, Heng-fu

Abstract

Empirical evidence shows that entrepreneurs hold a large fraction of wealth, have higher saving rates than workers, and face substantial uninsurable entrepreneurial and investment risks. This paper constructs a heterogeneous-agent general equilibrium model with uninsurable entrepreneurial risk and capital market imperfections to explore the implications of uninsurable entrepreneurial risk for wealth distribution and aggregate activity in an incomplete market economy. It is shown that entrepreurial risk can substantially affect both the wealth distribution and the macroeconomy.

Suggested Citation

  • Luo, Yulei & Zou, Heng-fu, 2008. "Uninsurable Entrepreneurial Risk, Capital Market Imperfections, and Heterogeneity in the Macroeconomy," MPRA Paper 59450, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59450
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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