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Risk-sharing and entrepreneurship

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  • Kilström, Matilda
  • Roth, Paula

Abstract

This study examines the impact of risk-sharing on entrepreneurship-driven innovation in an occupational choice model, where entrepreneurs exert effort to innovate. 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.

Suggested Citation

  • Kilström, Matilda & Roth, Paula, 2024. "Risk-sharing and entrepreneurship," Journal of Comparative Economics, Elsevier, vol. 52(1), pages 341-360.
    • Handle: RePEc:eee:jcecon:v:52:y:2024:i:1:p:341-360
    DOI: 10.1016/j.jce.2023.12.002
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    More about this item

    Keywords

    Innovation; Entrepreneurship; Institutions; Risk-sharing;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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