Credit Crunches and Credit Allocation in a Model of Entrepreneurship

Marco Bassetto, Marco Cagetti and Mariacristina De Nardi

No 19296, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that, by reducing entrepreneurial firm size and earnings, negative shocks have a very persistent effect on real activity. In determining the speed of recovery from an adverse economic shock, the most important factor is the extent to which the shock erodes entrepreneurial wealth.

JEL-codes: E2 E21 E23 E6 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ent and nep-mac
Note: EFG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Marco Bassetto & Marco Cagetti & Mariacristina De Nardi, . "Credit Crunches and Credit Allocation in a Model of Entrepreneurship," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.

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Related works:
Journal Article: Credit Crunches and Credit Allocation in a Model of Entrepreneurship (2015)
Working Paper: Credit crunches and credit allocation in a model of entrepreneurship (2013)
Working Paper: Credit Crunches and Credit Allocation in a Model of Entrepreneurship (2011)
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