Occupational Choice, Human Capital, and Financial Constraints

Rui Castro and Pavel Ševčík

No 23-02, Working Papers from Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management

Abstract: We study the aggregate productivity effects of firm-level financial frictions. Credit constraints affect not only production decisions, but also household level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling early in life. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. Firm level productivities are also lower due to schooling distortions. These effects combined account for between 36 and 68 percent of the U.S.-India aggregate productivity difference. Schooling distortions are the major source of aggregate productivity differences.

Keywords: Aggregate Productivity; Financial Frictions; Entrepreneurship; Human Capital; Misallocation (search for similar items in EconPapers)
JEL-codes: E24 I25 J24 O11 O15 O16 O47 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2023-08, Revised 2023-08
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dge, nep-eff, nep-ent, nep-fdg, nep-lma and nep-sbm
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Related works:
Journal Article: Occupational choice, human capital and financial constraints (2024)
Working Paper: Occupational Choice, Human Capital, and Financial Constraints (2016)
Working Paper: Occupational Choice, Human Capital, and Financing Constraints (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bbh:wpaper:23-02

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