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Occupational Choice, Human Capital, and Financing Constraints

Pavel Ševčík and Rui Castro ()

No 1321, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a framework which allows us to study the effect of financing constraints for both firm-level investment decisions, and household-level schooling decisions. We characterize the joint determination of occupational choices, educational outcomes, and production decisions. We first evaluate the role of financial frictions in distorting resource allocation. We find significant departures from efficiency, from adverse selection effects into entrepreneurship, to distortions in both investment/schooling and production decisions. We then (i) ask whether our model helps understand observed cross-country variation in outcomes, and (ii) quantify the full effect of financing frictions for economic development, and in particular whether our framework produces an amplification of the output and productivity effects of financing frictions compared to standard models without schooling investments.

Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ent and nep-ger
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Working Paper: Occupational Choice, Human Capital, and Financial Constraints (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1321

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