Entrepreneurship: skills and financing

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

This article analyzes an occupational choice model with risk-averse agents who are heterogeneous in terms of skills and wealth in a setting with financial frictions. We show that high- and middle-wealth individuals endowed with a balanced portfolio of skills upgrade their skills so that the resulting portfolio of skills is more balanced and choose entrepreneurship. In contrast, middle-wealth individuals endowed with an unbalanced portfolio of skills and low-wealth individuals specialize in the skill in which they have an absolute advantage and choose paid employment. Deeper financial development, a more balanced portfolio of skills, lower entrepreneurial risk, and a higher liquidation value for projects result in more entrepreneurship and higher welfare, while wealth redistributions and financial subsidies to entrepreneurs have an ambiguous effect on welfare.

Original languageEnglish
Pages (from-to)871-886
Number of pages16
JournalSmall Business Economics
Volume50
Issue number4
DOIs
Publication statusPublished - 1 Apr 2018
Externally publishedYes

Keywords

  • Entrepreneurship
  • Financial development
  • Multiple skills
  • Paid employment
  • Risk
  • Wealth

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Economics and Econometrics

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