Entrepreneurship, Frictions, and Wealth
This paper constructs and calibrates a parsimonious model of occupational choice that allows
for entrepreneurial entry, exit, and investment decisions in presence of borrowing constraints.
The model fits very well a number of empirical observations, including the observed wealth
distribution for entrepreneurs and workers. At the aggregate level, more restrictive borrowing
constraints generate less wealth concentration, and reduce average firm size, aggregate capital,
and the fraction of entrepreneurs. Voluntary bequests allow some high-ability workers to
establish or enlarge an entrepreneurial activity. With accidental bequests only, there would
be fewer very large firms, and less aggregate capital and wealth concentration.
