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Occupational Choice, Human Capital, and Financing Constraints

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  • Pavel Sevcik

    (Ecole des Sciences de Gestion, Universite du Quebec a Montreal (ESG UQAM))

  • Rui Castro

    (University of Montreal)

Abstract

We develop a framework which allows us to study the effect of financing constraints for both firm-level investment decisions, and household-level schooling decisions. We characterize the joint determination of occupational choices, educational outcomes, and production decisions. We first evaluate the role of financial frictions in distorting resource allocation. We find significant departures from efficiency, from adverse selection effects into entrepreneurship, to distortions in both investment/schooling and production decisions. We then (i) ask whether our model helps understand observed cross-country variation in outcomes, and (ii) quantify the full effect of financing frictions for economic development, and in particular whether our framework produces an amplification of the output and productivity effects of financing frictions compared to standard models without schooling investments.

Suggested Citation

  • Pavel Sevcik & Rui Castro, 2013. "Occupational Choice, Human Capital, and Financing Constraints," 2013 Meeting Papers 1321, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1321
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    Cited by:

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    2. Marti Mestieri & Johanna Schauer & Robert Townsend, 2017. "Human Capital Acquisition and Occupational Choice: Implications for Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 151-186, April.
    3. Virgiliu Midrigan & Fernando Leibovici & Julio Blanco, 2017. "Human Capital and Financial Development," 2017 Meeting Papers 1187, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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