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Entrepreneurship and Growth - An Overlapping Generations Approach -

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  • Clemens, Christiane

Abstract

This paper discusses a two-sector neoclassical overlapping generations economy with intermediate and final goods in the spirit of Romer (1990). The risk averse agents engage in one of two alternative occu pations: either firrm-ownership in the intermediate goods sector, char acterized by monopolistic competition, or employment as a worker in this sector. The occupational choice under risk endogenizes the num ber of firms and products in the intermediate goods industry. Since entrepreneurial profits are stochastic, an inefficiently low number of agents chooses firm-ownership. We find that expected profits of mo nopolists do not vanish in equilibrium and that the level of economic performance is inefficiently low due to the presence of risk. This result carries over to a suboptimally low growth rate in an enodgenous growth context.

Suggested Citation

  • Clemens, Christiane, 2004. "Entrepreneurship and Growth - An Overlapping Generations Approach -," Hannover Economic Papers (HEP) dp-304, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-304
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    References listed on IDEAS

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    Cited by:

    1. Christiane Clemens & Maik Heinemann, 2006. "On the Effects of Redistribution on Growth and Entrepreneurial Risk-taking," Journal of Economics, Springer, vol. 88(2), pages 131-158, August.

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    More about this item

    Keywords

    OLG; occupational choice; monopolistic competition; growth;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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