Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262038 
Year of Publication: 
2022
Series/Report no.: 
IFN Working Paper No. 1424
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
In this paper, we study the role of risk-sharing in entrepreneurship-driven innovation. Studying entrepreneurship and innovation entails modeling an occupational choice and an effort choice. Risk-sharing may increase the number of individuals who become entrepreneurs by limiting the downside risk. The effort of entrepreneurs may, however, be hampered by high risk-sharing if this limits the returns faced by successful entrepreneurs relative to unsuccessful entrepreneurs. We construct a simple theoretical model where risk-sharing may be either private or provided through the welfare state by means of taxation. We show that, in addition to the occupational and effort choice dimensions, the level of public risk-sharing also matters for the characteristics of entrepreneurs.
Subjects: 
Innovation
Institutions
Growth risk-sharing
Inequality
Incentives
JEL: 
D64
E02
O30
O33
O43
O47
Document Type: 
Working Paper

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