Entrepreneurship over the Life Cycle: Where are the Young Entrepreneurs?

Andres Hincapie
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Andres Hincapie: University of North Carolina at Chapel H

No 735, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Most individuals do not start a business and, if they do, they start well into their thirties. I study multiple mechanisms explaining these stylized facts. Using the Panel Study of Income Dynamics, I estimate a dynamic Roy model with accumulation of experience, risk aversion, and imperfect information about ability. Risk aversion reduces entrepreneurship by up to 40% and providing full information about ability increases it by 35%. The gap in first entry ages between paid employment and entrepreneurship results mainly from entry costs and information frictions. I study counterfactual policies (subsidies and education) that target these barriers to young entrepreneurship, thereby closing the gap, and show that fostering young entrepreneurship can yield higher returns than fostering entrepreneurship later in individuals' careers because the gains from early information are larger.

Date: 2019
New Economics Papers: this item is included in nep-dge, nep-ent and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:735

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