Occupational Choice, Human Capital, and Financial Constraints
Rui Castro () and
No 20162, University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP)
We study the aggregate productivity effects of firm-level financial frictions. Credit constraints affect not only production decisions but also household-level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. In addition, firm-level productivities are also lower due to distortions induced by the schooling responses. We find that these effects combined account for about 1/5 of the U.S.-India aggregate productivity difference. Requiring the model to match schooling differences significantly amplifies the impact of frictions, and the model accounts for 58% of the aggregate productivity difference.
Keywords: Aggregate Productivity; Financial Frictions; Entrepreneurship; Human Capital (search for similar items in EconPapers)
JEL-codes: E24 I25 J24 O11 O15 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dge, nep-ent, nep-hrm, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Working Paper: Occupational Choice, Human Capital, and Financing Constraints (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:uwo:hcuwoc:20162
Ordering information: This working paper can be ordered from
https://economics.uw ... itting_ordering.html
The price is Paper copy available by mail at a cost of $10.00 Canadian each.
Access Statistics for this paper
More papers in University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Centre for Human Capital and Productivity (CHCP), Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2.
Bibliographic data for series maintained by ().