RT Generic
T1 Financial frictions, occupational choice and economic inequality
A1 Allub, Lian
A1 Erosa, Andrés
A2 Universidad Carlos III de Madrid. Departamento de Economía, 
AB We develop a quantitative theory of entrepreneurship, income inequality, and financial frictions disciplined with household data from Brazil. The theory extends Lucas (1978) by modeling heterogeneity in two skills: -working and managerial skills. Consistently with the evidence, the theory implies three occupational categories: workers, employers, and self-employed entrepreneurs. We find that the removal of financial frictions decreases self-employment rates from 24% to 11% (with small effects on the number of employers), increases aggregate output by 48%, and has non- trivial effects on the distribution of income. We also find that while most households benefit from a reform that eliminates enforcement problems, the majority of employers (about two thirds) losefrom the reform. By depressing the demand for labor, limited enforcementdepresses theequilibrium wage rate, increasing the profits of employers. Our theory thus suggests that employers in Brazil may have a vested interested in maintaining a status quo with low enforcement.
SN 2340-5031
YR 2014
FD 2014-07
LK https://hdl.handle.net/10016/19180
UL https://hdl.handle.net/10016/19180
LA eng
NO Erosa acknowledges financial support from the European Commission through Marie Curie International Reintegration Grants PIRG03- GA-2008-231096
DS e-Archivo
RD 1 sept. 2024