Credit Constraints, Idiosyncratic Risks, and the Wealth Distribution in a Heterogeneous Agent Model

Christiane Clemens and Maik Heinemann ()
Additional contact information
Maik Heinemann: University of Lueneburg

No 46, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: This paper examines the effects of credit market imperfections and idiosyncratic risks on occupational choice, capital accumulation, as well as on the income and wealth distribution in a two sectore heterogeneous agent general equilibrium model. Workers and firm owners are subject to idiosyncratic shocks. Entrepreneurship is the riskier occupation. Compared to an economy with perfect capital markets, we find for the case of serially correlated shocks that more individuals choose the entrepreneurial profession in the presence of credit consraints, and that the fluctuation between occupationa increase too. Workers and entrepreneurs with high individual productivity tend to remain in their present occupantion, whereas low productivity individuals are more likely to switch between professions. Interestingly, these results reverse if we assume iid shocks, thus indicating that the nature of the underlying shocks plays an important role for the general equilibrium effects. In general, the likelihood of entrepreneurship increases with individual wealth.

Keywords: DSGE model; wealth distribution; occupational choice; credit constraints (search for similar items in EconPapers)
JEL-codes: C68 D3 D8 D9 G0 J24 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-03
New Economics Papers: this item is included in nep-bec, nep-dge and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.leuphana.de/fileadmin/user_upload/Fors ... pdf/wp_46_Upload.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lue:wpaper:46

Access Statistics for this paper

More papers in Working Paper Series in Economics from University of Lüneburg, Institute of Economics
Bibliographic data for series maintained by Joachim Wagner ( this e-mail address is bad, please contact ).