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Article
Entrepreneurship vs Paid Employment: Multiple Skills and Financing
Small Business Economics (2017)
  • Felipe Balmaceda, Assoc Prof.
Abstract
We present an occupational choice model with risk-averse agents who are heterogeneous in terms of skills and wealth in a setting with financial frictions.  We show that high-income individuals and middle-income individuals endowed with a balanced portfolio of skills upgrade their skills so the resulting portfolio of skills is more balanced and choose entrepreneurship, while middle-income individuals endowed with an unbalanced portfolio of skills and low-income individuals specialize in the skill in which they have an absolute advantage and choose paid employment. Deeper financial development, a more balanced portfolio of skills, lower entrepreneurial risk and a higher liquidation value result in more entrepreneurship and higher welfare, while wealth redistributions and financial subsidies to entrepreneurs have an ambiguous effects on welfare.
Keywords
  • Skill Diversification,
  • Entrepreneurship,
  • Financial Development,
  • Wealth Distribution.
Publication Date
Winter July 20, 2017
DOI
DOI 10.1007/s11187-017-9915-1
Citation Information
Felipe Balmaceda. "Entrepreneurship vs Paid Employment: Multiple Skills and Financing" Small Business Economics (2017) p. 1 - 16 ISSN: 0921-898X
Available at: http://works.bepress.com/felipe_balmaceda/14/