Serial Entrepreneurship and the Impact of Credit Constraints of Economic Development

Galina Vereshchagina

No 1173, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: This paper argues that the impact of credit constraints on the entrepreneurial activity and, via it, on economic development, crucially depends on the serial correlation in arrival of entrepreneurial ideas. Using an occupational choice model, it demonstrates that calibrating the serial correlation to match the amount of repeated entrepreneurship observed in the U.S., as opposed to assuming that arrivals of new entrepreneurial ideas are uncorrelated, reduces the impact of borrowing constraints on output per capita by more than fifty percent. The driving force behind this result is that people with past entrepreneurial experience tend to be richer and, thus, can implement new ideas more efficiently.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-ent
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:1173

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