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Entrepreneurship, Inter-Generational Business Transmission and Aging

Sumudu Kankanamge and Alexandre Gaillard ()

No 1503, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: This paper introduces a quantitative stylized life-cycle model with entrepreneurship and endogenous business selling, buying and founding decisions. Using a new dataset on the small business sale market as well as the SSBF, the SBO and the PSID datasets, we document the importance of the buying, selling and founding margins for entrepreneurs and find large mismatches on the business sale market. The data also reveal a key role for age and life-cycle dynamics for entrepreneurial entry and exit decisions. Using the model, we find that the combination of (i) illiquid business assets, (ii) frictions on the business sale market and (iii) the life-cycle components of entrepreneurship are key to reproducing our empirical finding. Finally, we simulate a large demographic event akin to the baby-boomers generation reaching peak retirement age and evaluate the macroeconomic outcome of such a change.

Date: 2019
New Economics Papers: this item is included in nep-age, nep-bec, nep-cse, nep-dge and nep-sbm
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