Occupational choice, human capital, and financial constraints

Arbeitspapier

We study the aggregate productivity effects of firm-level financial frictions. Credit constraints affect not only production decisions but also household-level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. In addition, firm-level productivities are also lower due to distortions induced by the schooling responses. We find that these effects combined account for about 1/5 of the U.S.-India aggregate productivity difference. Requiring the model to match schooling differences significantly amplifies the impact of frictions, and the model accounts for 58% of the aggregate productivity difference.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CHCP Working Paper ; No. 2016-2

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Education and Economic Development ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Macroeconomic Analyses of Economic Development ; Economic Development: Human Resources; Human Development; Income Distribution; Migration ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
• Subject: Aggregate Productivity ; Financial Frictions ; Entrepreneurship ; Human Capital

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Castro, Rui ; Ševčík, Pavel
• Event: Veröffentlichung
• (who): The University of Western Ontario, Centre for Human Capital and Productivity (CHCP)
• (where): London (Ontario)
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/180876
• Last update: 10.03.2025, 11:44 AM CET