TY - UNPB

T1 - Credit constraints, idiosyncratic risks, and the wealth ditribution in a heterogeneous agent model

AU - Clemens, Christiane

AU - Heinemann, Maik

PY - 2007

Y1 - 2007

N2 - This paper examines the effects of credit market imperfections and idiosyncratic risks on occupational choice, capital accumulation, as well as on the income and wealth distribution in a two sectore heterogeneous agent general equilibrium model. Workers and firm owners are subject to idiosyncratic shocks. Entrepreneurship is the riskier occupation. Compared to an economy with perfect capital markets, we find for the case of serially correlated shocks that more individuals choose the entrepreneurial profession in the presence of credit consraints, and that the fluctuation between occupationa increase too. Workers and entrepreneurs with high individual productivity tend to remain in their present occupantion, whereas low productivity individuals are more likely to switch between professions. Interestingly, these results reverse if we assume iid shocks, thus indicating that the nature of the underlying shocks plays an important role for the general equilibrium effects. In general, the likelihood of entrepreneurship increases with individual wealth.

AB - This paper examines the effects of credit market imperfections and idiosyncratic risks on occupational choice, capital accumulation, as well as on the income and wealth distribution in a two sectore heterogeneous agent general equilibrium model. Workers and firm owners are subject to idiosyncratic shocks. Entrepreneurship is the riskier occupation. Compared to an economy with perfect capital markets, we find for the case of serially correlated shocks that more individuals choose the entrepreneurial profession in the presence of credit consraints, and that the fluctuation between occupationa increase too. Workers and entrepreneurs with high individual productivity tend to remain in their present occupantion, whereas low productivity individuals are more likely to switch between professions. Interestingly, these results reverse if we assume iid shocks, thus indicating that the nature of the underlying shocks plays an important role for the general equilibrium effects. In general, the likelihood of entrepreneurship increases with individual wealth.

KW - Economics

KW - DSGE model

KW - wealth distribution

KW - occupational choice

KW - credit constraints

M3 - Working papers

T3 - Working paper series in economics

BT - Credit constraints, idiosyncratic risks, and the wealth ditribution in a heterogeneous agent model

PB - Institut für Volkswirtschaftslehre der Universität Lüneburg

CY - Lüneburg

ER -