Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22416
Authors: 
Clemens, Christiane
Year of Publication: 
2004
Series/Report no.: 
Diskussionspapiere des Fachbereichs Wirtschaftswissenschaften, Universität Hannover 304
Abstract: 
This paper discusses a two–sector neoclassical overlapping generations economy with intermediate and final goods in the spirit of Romer (1990). The risk averse agents engage in one of two alternative occupations: either firm-ownership in the intermediate goods sector, characterized by monopolistic competition, or employment as a worker in this sector. The occupational choice under risk endogenizes the number of firms and products in the intermediate goods industry. Since entrepreneurial profits are stochastic, an inefficiently low number of agents chooses firm-ownership. We find that expected profits of monopolists do not vanish in equilibrium and that the level of economic performance is inefficiently low due to the presence of risk. This result carries over to a suboptimally low growth rate in an enodgenous growth context.
Subjects: 
OLG
occupational choice
monopolistic competition
growth
JEL: 
D9
D4
D8
D5
O4
Document Type: 
Working Paper

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