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dc.contributor.authorClemens, Christianeen_US
dc.contributor.authorHeinemann, Maiken_US
dc.description.abstractThis paper deals with credit market imperfections and idiosyncratic risks in a twosector heterogeneous agent dynamic general equilibrium model of occupational choice. We focus especially on the effects of tightening financial constraints on macroeconomic performance, entrepreneurial risktaking, and social mobility. Contrary to many models in the literature, our comparativestatic results cover a broad range for borrowing constraints, from an unrestrained to a perfectly constrained economy. In our baseline model, we find substantial gains in output, welfare, and wealth equality associated with credit market improvements. The marginal gains from relaxing constraints are largest for empirically relevant debtequity ratios. Interestingly, the entrepreneurship rate and social mobility respond nonmonotonically to a change in the tightness of financial constraints. The results crucially depend on the degree of income persistence and feedback effects in general equilibrium, where optimal firm sizes and the demand for credit are determined endogenously.en_US
dc.publisherLeuphana-Univ. Lüneburgen_US
dc.relation.ispartofseriesUniversity of Lüneburg Working Paper Series in Economics 103en_US
dc.subject.keywordoccupational choiceen_US
dc.subject.keywordfinancial constraintsen_US
dc.subject.keywordwealth distributionen_US
dc.titleOn entrepreneurial risktaking and the macroeconomic effects of financial constraintsen_US
dc.typeWorking Paperen_US
Appears in Collections:Working Paper Series in Economics, Leuphana Universität Lüneburg

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