Entrepreneurship, Wealth, Liquidity Constraints, and Start-Up Costs

  title={Entrepreneurship, Wealth, Liquidity Constraints, and Start-Up Costs},
  author={Raquel Fonseca and Pierre-Carl Michaud and Thepthida Sopraseuth},
  • Raquel Fonseca, Pierre-Carl Michaud, Thepthida Sopraseuth
  • Published 2007
We study the effects of liquidity constraints and start-up costs on the relationship between wealth and the fraction of entrepreneurs in an economy. We develop a dynamic occupational choice model with endogenous wealth and entry into entrepreneurship. The model predicts that, with liquidity constraints, the probability of entering entrepreneurship is an increasing function of individual wealth while the introduction of start-up costs tends to flatten this relationship. The theoretical… CONTINUE READING

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