nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒10‒29
five papers chosen by
Marcus Dejardin
Université de Namur

  1. A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability By Michele Dell'Era; Luca David Opromolla; Luis Santos-Pinto
  2. Who Creates New Firms When Local Opportunities Arise? By Shai Bernstein; Emanuele Colonnelli; Davide Malacrino; Tim McQuade
  3. Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs By Richard Fabling
  4. Closing Gender Gaps in India: Does Increasing Womens’ Access to Finance Help? By Purva Khera
  5. Is there anything special about local banks as SME lenders? Evidence from bank corrective programs By Iftekhar Hasan; Krzysztof Jackowicz; Robert Jagiełło; Oskar Kowalewski; Łukasz Kozłowski

  1. By: Michele Dell'Era (National Bank of Slovakia); Luca David Opromolla (Banco de Portugal); Luis Santos-Pinto (Banco de Portugal)
    Abstract: This paper studies the impact of optimism on occupational choice using a general equilibrium framework. The model shows that optimism has four main qualitative effects: it leads to a misallocation of talent, drives up input prices, raises the number of entrepreneurs, and makes entrepreneurs worse o . We calibrate the model to match U.S. manufacturing data. This allows us to make quantitative predictions regarding the impact of optimism on occupational choice, input prices, the returns to entrepreneurship,and output. The calibration shows that optimism can explain the empirical puzzle of the low mean returns to entrepreneurship compared to average wages.
    Keywords: General Equilibrium; Entrepreneurship; Optimism
    JEL: D50 H21 J24 L26
    Date: 2018–10
  2. By: Shai Bernstein; Emanuele Colonnelli; Davide Malacrino; Tim McQuade
    Abstract: New firm formation is a critical driver of job creation, and an important contributor to the responsiveness of the economy to aggregate shocks. In this paper we examine the characteristics of the individuals who become entrepreneurs when local opportunities arise due to an increase in local demand. We identify local demand shocks by linking fluctuations in global commodity prices to municipality level agricultural endowments in Brazil. We find that the firm creation response is almost entirely driven by young and skilled individuals, as measured by their level of experience, education, and past occupations involving creativity, problem-solving and managerial roles. In contrast, we find no such response within the same municipalities among skilled, yet older individuals, highlighting the importance of lifecycle considerations. These responsive individuals are younger and more skilled than the average entrepreneur in the population. The entrepreneurial response of young individuals is larger in municipalities with better access to finance, and in municipalities with more skilled human capital. These results highlight how the characteristics of the local population can have a significant impact on the entrepreneurial responsiveness of the economy.
    Date: 2018–09–28
  3. By: Richard Fabling (Independent Researcher)
    Abstract: Owner-operated firms are an important part of the New Zealand economy. They employ approximately 30% of the private-for-profit workforce, as well as providing jobs and income to the working proprietors themselves. This paper addresses two questions: what characteristics are associated with entrepreneurship (starting a self-employed business); and which sorts of entrepreneurs are more successful (create jobs)? We pay particular attention to differences in start-up and survival rates by business owner sex and ethnicity, but also consider whether other individual characteristics (including age and skill) and prior job characteristics also relate to the decision to start a business or to create jobs. We find substantial negative gaps in entrepreneurship for females and non-European-only ethnicity groups – gaps that arise in large part because of differential rates of entry into self-employment and, in the case of non-European-only ethnicities, higher attrition rates from self-employment after entry. These gaps persist in the presence of controls for skill, prior labour market experience and other individual characteristics.
    Keywords: Entrepreneurship; self-employment; job creation; survival; ethnicity; sex; Integrated Data Infrastructure (IDI)
    JEL: J23 L26 M13
    Date: 2018–10
  4. By: Purva Khera
    Abstract: Gender gaps in womens’ economic opportunities—labor market and entrepreneurship—have remained high in India. Lack of adequate collateral limits women entrepreneurs’ ability to access formal finance, leaving them to rely on informal sources, constraining their growth. A small-open economy DSGE model is built to investigate the long-run macroeconomic impacts from closing gender gaps in financial access. Results suggest that an increase in women entrepreneurs access to formal credit results in higher female entrepreneurship and employment, which boosts India’s output by 1.6 percent. However, regulations and gender-specific constraints in the labor market limit potential gains as females’ access to quality jobs in the formal sector remains restricted. The paper shows that the factors influencing the number of females are different from those influencing the share of females in formal economic activity. Combining gender-targeted financial inclusion policies with policies that lower constraints on formal sector employment could boost India’s output by 6.8 percent.
    Date: 2018–09–28
  5. By: Iftekhar Hasan (Fordham University, Bank of Finland and University of Sydney); Krzysztof Jackowicz (Department of Banking, Insurance and Risk, Kozminski University, Poland); Robert Jagiełło (Warsaw School of Economics and National Bank of Poland); Oskar Kowalewski (IÉSEG School of Management and LEM-CNRS (UMR 9221)); Łukasz Kozłowski (Department of Banking, Insurance and Risk, Kozminski University, Poland)
    Abstract: We re-investigate the special role of local banks in shaping the financial constraints of small and medium-sized enterprises (SMEs). Using a comprehensive dataset from an emerging economy, including the information on local bank corrective programs, we find that local banks remain privileged and, most importantly, difficult to replace lenders for SMEs. We show that the deterioration of a SME’s access to bank financing linked to local banks’ corrective programs depends on the presence of other healthy local banks in the SME’s vicinity. Furthermore, we demonstrate that healthy local banks, when their neighboring peers experience financial difficulties, substantially increase lending.
    Keywords: Smart Beta, strategic beta, factor investing, factor selection, Bayesian variable selection
    Date: 2018–10

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