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Adverse Selection and Entrepreneurship in a Model of Development

Esteban Jaimovich ()

No 78, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper presents a theory in which risk-averse heterogeneously talented entrepreneurs are the key agents driving the process of development and modernisation. Entrepreneurial skills are private information, which prevents full risk sharing. In that setup, development to a modern industrial economy might fail to take place, since potentially talented entrepreneurs may refrain from taking on the entrepreneurial risks as a way to avoid income shocks. An interesting feature of the model is that the informational asymmetries in the economy are endogenous to the process of development, as they are related to the heterogeneity in entrepreneurial skills required in the manufacturing activities.

Keywords: Adverse Selection; Development; Entrepreneurship; Risk-Sharing (search for similar items in EconPapers)
JEL-codes: O12 O16 D81 D82 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008
New Economics Papers: this item is included in nep-cta, nep-dev, nep-ent and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

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Journal Article: Adverse Selection and Entrepreneurship in a Model of Development (2010) Downloads
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