Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221310
Authors: 
Newman, Andrew F.
Year of Publication: 
1991
Series/Report no.: 
Discussion Paper No. 951
Abstract: 
This paper offers an account of the occupational choice among wage work, self-employment and entrepreneurship which contrasts with the "Knightian" one based on risk attitudes. As shown by example, the latter can lead to perverse results. We propose a model in which imperfect capital markets arising from costly output verification cause the cost of capital to decline with an agent's wealth. Employment contracts, which require costly labor monitoring are then viewed as a substitute for financial contracts. The prevalence of employment contracts (as distinguished from self-employment) then depends on (1) how effective is the labor monitoring technology as a substitute for output verification in the capital market; and (2) how unequal is the distribution of wealth.
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.