Public Venture Capital and Entrepreneurship

Oana Secrieru and Marianne Vigneault

Staff Working Papers from Bank of Canada

Abstract: Entrepreneurship is a key factor in promoting growth in output and employment. Consequently, to encourage new start-ups, most governments in developed countries have public venture capital programs. The authors develop a model that endogenously determines the number of entrepreneurs and the optimal quantity of financing and managerial advice provided by a public venture capital program. Their analysis is based on a model of occupational choice that has informational asymmetries regarding the ability of entrepreneurs. The authors identify circumstances under which over- or underinvestment can occur. They also show that the equilibrium is characterized by an inefficient number (too many or too few) of less-able entrepreneurs. Furthermore, the authors find that the government faces disincentives in providing small amounts of managerial advice; larger amounts of such advice may be optimal.

Keywords: Financial markets; Fiscal policy; Labour markets (search for similar items in EconPapers)
JEL-codes: G24 G28 J24 M13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2004
New Economics Papers: this item is included in nep-cfn and nep-ent
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:04-10

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