Economics at your fingertips  

Financial frictions, occupational choice and economic inequality

Lian Allub and Andres Erosa

Journal of Monetary Economics, 2019, vol. 107, issue C, 63-76

Abstract: The Lucas (1978) model is extended to incorporate heterogeneity in working ability and a time allocation decision by entrepreneurs (work versus manage). Financial frictions distort not only the average skill of entrepreneurs but also the average skill of workers. The model economy accounts for half of the association between entrepreneurship and external finance to GDP in the data, whereas a standard span of control model explains only about one tenth. The variation in entrepreneurship is mostly due to the variation in self-employed entrepreneurs rather than in employers. Moreover, financial frictions have larger effects on output per worker, TFP, and inequality.

Keywords: Financial frictions; Entrepreneurs; Employers; Self-employed; TFP; Inequality (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Financial frictions, occupational choice and economic inequality (2014) Downloads
Working Paper: Financial Frictions, Occupational Choice and Economic Inequality (2012) Downloads
Working Paper: Financial Frictions, Occupational Choice, and Economic Inequality (2012) Downloads
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:

DOI: 10.1016/j.jmoneco.2018.12.003

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-10-10
Handle: RePEc:eee:moneco:v:107:y:2019:i:c:p:63-76