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Credit Constraints, Entrepreneurial Talent, and Economic Development

Milo Bianchi 1, *
Abstract : In this paper, we formalize the view that economic development requires high rates of productive entrepreneurship, and this requires an e¢ cient matching between entrepreneurial talent and production technologies. We …rst explore the role of …nancial development in promoting such e¢ cient allocation of talent, which results in higher production, job creation and social mobility. We then show how di¤er- ent levels of …nancial development may endogenously arise in a setting in which …nancial constraints depend on individual incentives to mis- behave, these incentives depend on how many jobs are available, and this in turn depends on the level of …nancial development. Such com- plementarity between labor market and …nancial market development may generate highly divergent development paths even for countries with very similar initial conditions.
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Submitted on : Wednesday, October 26, 2011 - 2:23:46 PM
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Milo Bianchi. Credit Constraints, Entrepreneurial Talent, and Economic Development. Small Business Economics, Springer Verlag, 2010, pp.93-104. ⟨halshs-00636002⟩

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