Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90032
Authors: 
Poschke, Markus
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7757
Abstract: 
Developing and emerging economies have high entrepreneurship rates and relatively many small firms. There is enormous heterogeneity among these firms and entrepreneurs. This paper presents a simple occupational choice model that captures motives for entrepreneurship at both edges of the size distribution. The model is then used to analyse the effects of productivity growth, distortions, financial and labor market frictions, and risk. Capturing entrepreneurship across the size distribution allows for different reactions of high- and low-ability entrepreneurs to changes in policies and the environment. These may result in powerful general equilibrium effects. In particular, policies affecting high-ability entrepreneurs potentially running large firms can indirectly have a strong effect on entry by low-ability entrepreneurs and thus on the prevalence of small firms.
Subjects: 
entrepreneurship
firm entry and exit
development
labor market regulation
JEL: 
J24
L26
O11
O17
Document Type: 
Working Paper

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