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Entrepreneurship, Inter-Generational Business Transmission and Aging

Author

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  • Sumudu Kankanamge

    (Toulouse School of Economics)

  • Alexandre Gaillard

    (Toulouse School of Economics)

Abstract

This paper introduces a quantitative stylized life-cycle model with entrepreneurship and endogenous business selling, buying and founding decisions. Using a new dataset on the small business sale market as well as the SSBF, the SBO and the PSID datasets, we document the importance of the buying, selling and founding margins for entrepreneurs and find large mismatches on the business sale market. The data also reveal a key role for age and life-cycle dynamics for entrepreneurial entry and exit decisions. Using the model, we find that the combination of (i) illiquid business assets, (ii) frictions on the business sale market and (iii) the life-cycle components of entrepreneurship are key to reproducing our empirical finding. Finally, we simulate a large demographic event akin to the baby-boomers generation reaching peak retirement age and evaluate the macroeconomic outcome of such a change.

Suggested Citation

  • Sumudu Kankanamge & Alexandre Gaillard, 2019. "Entrepreneurship, Inter-Generational Business Transmission and Aging," 2019 Meeting Papers 1503, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:1503
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    References listed on IDEAS

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