Credit constraints, idiosyncratic risks, and the wealth ditribution in a heterogeneous agent model
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Lüneburg: Institut für Volkswirtschaftslehre der Universität Lüneburg, 2007. (Working paper series in economics; No. 46).
Research output: Working paper › Working papers
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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 -