Entrepreneurship, Frictions and Wealth

Tags:
Entrepreneur,
Entrepreneurship,
Federal Reserve Bank Of Minneapolis,
Management,
Wealth
Source:
Federal Reserve Bank of Minneapolis

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Overview: Entrepreneurship is a very important determinant of the distribution of wealth. In the data entrepreneurs are a small fraction of the population, but have a high saving rate and hold a large share of total wealth. Conversely, the distribution of wealth has a significant effect on entrepreneurship: initial assets have great influence on entrepreneurial decisions. This paper constructs a model that generates these two facts from two features: an overlapping-generations structure and the limited ability to enforce repayment of the loans to entrepreneurs. It finds that less restrictive borrowing constraints generate less wealth concentration and more entrepreneurs.

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Format: PDF | Size: 181KB | Date: Mar 2002 | Pages: 33

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