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Entrepreneurship, growth and productivity with bubbles

Lise Clain-Chamosset-Yvrard, Xavier Raurich () and Thomas Seegmuller ()
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Lise Clain-Chamosset-Yvrard: GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique
Thomas Seegmuller: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université

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Abstract: Entrepreneurship, growth and total factor productivity are larger when there is a financial bubble. We explain these facts using a growth model with financial bubbles in which individuals face heterogeneous wages and returns on productive investment. The heterogeneity in the return of in- vestment separates individuals between savers and entrepreneurs. Savers buy financial assets, which are deposits or a financial bubble. Entrepreneurs incur in a start-up cost and borrow to invest in productive capital. The bubble provides liquidities to credit-constrained entrepreneurs. These liquidities increase investment and entrepreneurship when the start- up cost is large enough, which explains that growth and entrepreneurship can be larger with bubbles. Finally, productivity can be larger when the bubble further increases the investment of more productive entrepreneurs. This can occur when the return of investment is correlated with wages.

Keywords: bubble; entrepreneurship; growth; productivity (search for similar items in EconPapers)
Date: 2021-02-05
New Economics Papers: this item is included in nep-dge, nep-eff, nep-ent and nep-fdg
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-03134474
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