Constrained Efficient Entrepreneurship

Autores
Allub, Lian; Ferriere, Axelle; Santaeulàlia-Llopis, Raül; Zheng, Yu
Año de publicación
2018
Idioma
inglés
Tipo de recurso
documento de conferencia
Estado
versión publicada
Descripción
In the standard incomplete markets (SIM) model the risk of low future labor income (e.g., unemployment) generates precautionary savings. This way, the relation between capital accumulation and consumption insurance is positive. This is not necessarily the case if agents face entrepreneurship choice. Entrepreneurs face risky investment and might be willing to trade insurance for accumulation depending on their permanent ability across sectors, idiosyncratic shocks, and wealth. We study the welfare properties of an entrepreneurship choice model using the notion of constrained efficiency where a utilitarian planner dictates occupational choices and savings across risk-free and risky assets, while respecting individual budget constraints. We find that although the planner increases aggregate capital, a result shared with the SIM models, the planner changes the composition of aggregate capital and favors the accumulation of the risky capital employed by entrepreneurs at the cost of insurance. The planner also runs into more debt to finance a higher amount of entrepreneurs, lowering the entrepreneurship productivity threshold of the decentralized economy. All these results are based on a two-period model that we are currently extending to an infinite horizon and realistically calibrated economy. Finally, we investigate policies that can bring the competitive equilibrium allocations closer to the constrained-efficient planner. The set of policies that we plan to investigate include (i) the capitalization of unemployment benefits, (ii) tax reductions for new businesses, and (iii) a “second” chance clause that allows for retakes of (i) and (ii) after previous exits from entrepreneurship (i.e., failure). An extension of the model to the possibility of selling businesses is on the way.
Facultad de Ciencias Económicas
Materia
Ciencias Económicas
standard incomplete markets
constrained efficiency
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by-nc-sa/4.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/164434

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spelling Constrained Efficient EntrepreneurshipAllub, LianFerriere, AxelleSantaeulàlia-Llopis, RaülZheng, YuCiencias Económicasstandard incomplete marketsconstrained efficiencyIn the standard incomplete markets (SIM) model the risk of low future labor income (e.g., unemployment) generates precautionary savings. This way, the relation between capital accumulation and consumption insurance is positive. This is not necessarily the case if agents face entrepreneurship choice. Entrepreneurs face risky investment and might be willing to trade insurance for accumulation depending on their permanent ability across sectors, idiosyncratic shocks, and wealth. We study the welfare properties of an entrepreneurship choice model using the notion of constrained efficiency where a utilitarian planner dictates occupational choices and savings across risk-free and risky assets, while respecting individual budget constraints. We find that although the planner increases aggregate capital, a result shared with the SIM models, the planner changes the composition of aggregate capital and favors the accumulation of the risky capital employed by entrepreneurs at the cost of insurance. The planner also runs into more debt to finance a higher amount of entrepreneurs, lowering the entrepreneurship productivity threshold of the decentralized economy. All these results are based on a two-period model that we are currently extending to an infinite horizon and realistically calibrated economy. Finally, we investigate policies that can bring the competitive equilibrium allocations closer to the constrained-efficient planner. The set of policies that we plan to investigate include (i) the capitalization of unemployment benefits, (ii) tax reductions for new businesses, and (iii) a “second” chance clause that allows for retakes of (i) and (ii) after previous exits from entrepreneurship (i.e., failure). An extension of the model to the possibility of selling businesses is on the way.Facultad de Ciencias Económicas2018-11info:eu-repo/semantics/conferenceObjectinfo:eu-repo/semantics/publishedVersionObjeto de conferenciahttp://purl.org/coar/resource_type/c_5794info:ar-repo/semantics/documentoDeConferenciaapplication/pdfhttp://sedici.unlp.edu.ar/handle/10915/164434enginfo:eu-repo/semantics/altIdentifier/isbn/978-987-28590-6-0info:eu-repo/semantics/altIdentifier/url/https://bd.aaep.org.ar/anales/works/works2018/allub.pdfinfo:eu-repo/semantics/altIdentifier/issn/1852-0022info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by-nc-sa/4.0/Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T11:43:21Zoai:sedici.unlp.edu.ar:10915/164434Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 11:43:22.26SEDICI (UNLP) - Universidad Nacional de La Platafalse
dc.title.none.fl_str_mv Constrained Efficient Entrepreneurship
title Constrained Efficient Entrepreneurship
spellingShingle Constrained Efficient Entrepreneurship
Allub, Lian
Ciencias Económicas
standard incomplete markets
constrained efficiency
title_short Constrained Efficient Entrepreneurship
title_full Constrained Efficient Entrepreneurship
title_fullStr Constrained Efficient Entrepreneurship
title_full_unstemmed Constrained Efficient Entrepreneurship
title_sort Constrained Efficient Entrepreneurship
dc.creator.none.fl_str_mv Allub, Lian
Ferriere, Axelle
Santaeulàlia-Llopis, Raül
Zheng, Yu
author Allub, Lian
author_facet Allub, Lian
Ferriere, Axelle
Santaeulàlia-Llopis, Raül
Zheng, Yu
author_role author
author2 Ferriere, Axelle
Santaeulàlia-Llopis, Raül
Zheng, Yu
author2_role author
author
author
dc.subject.none.fl_str_mv Ciencias Económicas
standard incomplete markets
constrained efficiency
topic Ciencias Económicas
standard incomplete markets
constrained efficiency
dc.description.none.fl_txt_mv In the standard incomplete markets (SIM) model the risk of low future labor income (e.g., unemployment) generates precautionary savings. This way, the relation between capital accumulation and consumption insurance is positive. This is not necessarily the case if agents face entrepreneurship choice. Entrepreneurs face risky investment and might be willing to trade insurance for accumulation depending on their permanent ability across sectors, idiosyncratic shocks, and wealth. We study the welfare properties of an entrepreneurship choice model using the notion of constrained efficiency where a utilitarian planner dictates occupational choices and savings across risk-free and risky assets, while respecting individual budget constraints. We find that although the planner increases aggregate capital, a result shared with the SIM models, the planner changes the composition of aggregate capital and favors the accumulation of the risky capital employed by entrepreneurs at the cost of insurance. The planner also runs into more debt to finance a higher amount of entrepreneurs, lowering the entrepreneurship productivity threshold of the decentralized economy. All these results are based on a two-period model that we are currently extending to an infinite horizon and realistically calibrated economy. Finally, we investigate policies that can bring the competitive equilibrium allocations closer to the constrained-efficient planner. The set of policies that we plan to investigate include (i) the capitalization of unemployment benefits, (ii) tax reductions for new businesses, and (iii) a “second” chance clause that allows for retakes of (i) and (ii) after previous exits from entrepreneurship (i.e., failure). An extension of the model to the possibility of selling businesses is on the way.
Facultad de Ciencias Económicas
description In the standard incomplete markets (SIM) model the risk of low future labor income (e.g., unemployment) generates precautionary savings. This way, the relation between capital accumulation and consumption insurance is positive. This is not necessarily the case if agents face entrepreneurship choice. Entrepreneurs face risky investment and might be willing to trade insurance for accumulation depending on their permanent ability across sectors, idiosyncratic shocks, and wealth. We study the welfare properties of an entrepreneurship choice model using the notion of constrained efficiency where a utilitarian planner dictates occupational choices and savings across risk-free and risky assets, while respecting individual budget constraints. We find that although the planner increases aggregate capital, a result shared with the SIM models, the planner changes the composition of aggregate capital and favors the accumulation of the risky capital employed by entrepreneurs at the cost of insurance. The planner also runs into more debt to finance a higher amount of entrepreneurs, lowering the entrepreneurship productivity threshold of the decentralized economy. All these results are based on a two-period model that we are currently extending to an infinite horizon and realistically calibrated economy. Finally, we investigate policies that can bring the competitive equilibrium allocations closer to the constrained-efficient planner. The set of policies that we plan to investigate include (i) the capitalization of unemployment benefits, (ii) tax reductions for new businesses, and (iii) a “second” chance clause that allows for retakes of (i) and (ii) after previous exits from entrepreneurship (i.e., failure). An extension of the model to the possibility of selling businesses is on the way.
publishDate 2018
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