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How does Caste Affect Entrepreneurship? Birth vs Worth

Sampreet Goraya

No 1104, Working Papers from Barcelona Graduate School of Economics

Abstract: This paper examines the relative importance of the caste system in explaining the resource misallocation in India and quantifies its impact on aggregate productivity. I document that the historically disadvantaged castes (LC) are less likely to enter entrepreneurship even though they are more productive on average. At the intensive margin, the LC entrepreneurs are less capital-intensive but have higher marginal revenue product of capital relative to high castes. In a quantitative model of entrepreneurship, I find that the LC face higher entry cost and stricter financial constraints and that such asymmetries reduce aggregate TFP by 2.54% and output by 6%.

Keywords: misallocation; productivity; caste system (search for similar items in EconPapers)
JEL-codes: O11 E23 D61 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-ent, nep-fdg and nep-mac
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