Entrepreneurship, Asymmetric Information, and Unemployment

Robin Boadway, Nicolas Marceau, Maurice Marchand and Marianne Vigneault

International Tax and Public Finance, 1998, vol. 5, issue 3, 307-327

Abstract: We examine how three sources of asymmetric information affect the supply of entrepreneurs and unemployment. In the first case, banks cannot observe entrepreneurs' risk of failure so ration credit. This increases the number of entrepreneurs and the level of unemployment. In the second case, firms cannot observe workers' effort so offer a wage above the market clearing one. This results in unemployment and too few entrepreneurs. The final case arises when firms cannot observe workers' abilities. A pooling wage is offered and results in too many entrepreneurs. The role of government in restoring efficiency is explored. Copyright Kluwer Academic Publishers 1998

Keywords: Entrepreneurship; unemployment; occupational choice (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (16)

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DOI: 10.1023/A:1008682110911

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