- An estimated equilibrium model of business formation and labor demand of entrepeneurs
- Amsterdam / Rotterdam: Tinbergen Institute
- Tinbergen Institute Discussion Paper
- Volume | Edition (Serie)
- TI 1999-073/4
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
This paper develops a theoretical model which explains businessformation and labor demand of entrepreneurs by thegiven distribution of risk attitude and entrepreneurial ability amongthe workforce. This results in an equilibrium modelwhich is converted into a structural econometric model of theindividual decision to start a business and if so how manypeople to employ. The model is estimated on a sample of Dutchindividuals. The empirical results confirm theimportance of both risk taking and ability.
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