Uninsurable Entrepreneurial Risk, Capital Market Imperfections, and Heterogeneity in the Macroeconomy

Yulei Luo () and Heng-Fu Zou ()

MPRA Paper from University Library of Munich, Germany

Abstract: Empirical evidence shows that entrepreneurs hold a large fraction of wealth, have higher saving rates than workers, and face substantial uninsurable entrepreneurial and investment risks. This paper constructs a heterogeneous-agent general equilibrium model with uninsurable entrepreneurial risk and capital market imperfections to explore the implications of uninsurable entrepreneurial risk for wealth distribution and aggregate activity in an incomplete market economy. It is shown that entrepreurial risk can substantially affect both the wealth distribution and the macroeconomy.

Keywords: Wealth Distribution; Idiosyncratic Entrepreneurial Risk; Incomplete Capital Markets (search for similar items in EconPapers)
JEL-codes: C68 E21 E24 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59450

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