Redistribution as a selection device

• 成果类型: Article
• 署名作者: Grüner, HP
• 署名单位: University of Mannheim; IZA Institute Labor Economics; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/S0022-0531(02)00015-7
• 发表日期: 2003
• 页码: 194-216
• 关键词: firm-ownership; education; general equilibrium with moral hazard and adverse selection; selection of entrepreneurs

摘要

This paper studies the role of the wealth distribution for the market selection of entrepreneurs when agents differ in talent. It argues that the redistribution of initial endowments can increase an economy's surplus because more talented individuals get credit for their risky investment projects. Moreover, the redistribution of initial endowments may lead to a Pareto-improvement although all agents are non-satiable. An agent's entrepreneurial ability is his private information and there is moral hazard in production. I find conditions such that unproductive rich entrepreneurs crowd out productive poor ones on the capital market. Then redistribution of initial endowments may lead to a new equilibrium where market participants are better informed about the entrepreneurs' ability. The new equilibrium is characterized by (i) the selection of better entrepreneurs, (ii) a higher riskless rate of return on capital, (iii) lower repayments of successful entrepreneurs to their creditors and (iv) the fact that all agents are better off. (C) 2002 Elsevier Science (USA). All rights reserved.