Academy for Entrepreneurial Leadership | Illinois

Joanna Alexopoulos
Department of Economics, College of Liberal Arts and Sciences

Abstract: Ability and Entrepreneurship

The goal of this project is to analyze the impact of two individual initial conditions, wealth and ability, and the impact of two financial frictions, intermediation costs and contract enforcement, on an individual’s choice to become an entrepreneur or worker. Also investigated will be the impact of these factors on the size of the firm chosen by an entrepreneur. These choices have a great impact on the macro-economy because they lead to differences in output per capita and income inequality, thus affecting a country’s standard of living.

An amended version of the Antunes, Cavalcanti and Villamil general equilibrium model will be used, which provides a framework for investigating agents with different initial wealth, ability and a variety of economic “frictions.” The key innovation in this project relative to existing research is to consider a broader definition of ability. The U.S. economy will be used as a benchmark, and OECD data will be used for other countries.